Technical Assistance Consultant’s Report

Project Number: 42012 February 2010

People’s Republic of : Preparing the Urban–Rural Infrastructure Development Demonstration Project

Prepared by AECOM Asia Co. Ltd.

For Chongqing Municipal Government

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. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Asian Development Bank

TA No. 7108-PRC

Chongqing Urban-Rural Infrastructure Development Demonstration Project

Final Report

February 2010

Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report TABLE OF CONTENTS

ABBREVIATIONS ...... iii ACKNOWLEDGEMENTS ...... vii EXECUTIVE SUMMARY...... ix 1 INTRODUCTION ...... 1 1.1 Background of the TA...... 1 1.2 Objectives of the TA ...... 1 1.3 Scope of the TA...... 2 1.4 Deliverables of the TA ...... 2 1.5 Conduct of the TA ...... 3 1.6 Training provided by TA Consultants and ADB in the missions ...... 6 1.7 Variations to the Contract ...... 7 1.8 Equipment Procured ...... 7 1.9 Structure of the Final Report ...... 8 2 RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES ...... 9 2.1 Performance Indicators and Analysis ...... 9 2.2 Analysis of Key Problems and Opportunities...... 11 2.2.1 Project Background...... 11 2.2.2 Project Rationale...... 13 2.2.3 Policy Dialogue ...... 14 2.2.4 Development Coordination...... 15 2.2.5 Lessons Learned...... 15 3 THE PROPOSED PROJECT ...... 17 3.1 Impact and Outcome...... 17 3.2 Outputs ...... 17 3.3 Demonstration Features...... 17 3.4 Project Investment Plan ...... 18 3.5 Financing Plan ...... 19 3.6 Implementation Arrangements...... 19 3.6.1 Project Management ...... 20 3.6.2 Implementation Period ...... 21 3.6.3 Procurement ...... 21 3.6.4 Consulting Services ...... 21 3.6.5 Advance Procurement Actions and Retroactive Financing...... 22 3.6.6 Governance and Anticorruption Policy...... 22 3.6.7 Disbursement Arrangements...... 23 3.6.8 Accounting, Auditing and Reporting...... 23 3.6.9 Project Performance Monitoring and Evaluation...... 24 3.6.10 Project Review ...... 24 4 TECHNICAL ANALYSIS OF ENGINEERING FEASIBILITY STUDIES ...... 25 4.1 Introduction ...... 25 4.2 Component selection criteria...... 25 4.3 Identification of the Project’s sub-components...... 25 4.4 Inputs from ADB...... 26 5 PROJECT BENEFITS, IMPACTS, ASSUMPTIONS AND RISKS ...... 28 5.1 Poverty Reduction and Social Aspects ...... 28 5.2 Resettlement...... 29 5.3 Financial Aspects ...... 29 5.4 Economic Aspects...... 30 5.5 Environmental Aspects...... 30 5.6 Project Risks and Mitigation Measures...... 31 6 ASSURANCES AND CONDITIONS ...... 32 6.1 Assurances ...... 32 6.2 Condition for Disbursement...... 33

APPENDICES 1 Design and Monitoring Framework 23

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 2 Sector and Subsector Analysis 26 3 Development Coordination 30 4 Detailed Description of Sub-Components 32 5 Summary Cost Estimates and Financing Plan 34 6 Onlending Arrangements and Indicative Funds Flow 36 7 Project Organization 37 8 Implementation Schedule 38 9 Summary and Detailed Procurement Plan 40 10 Summary Poverty Reduction and Social Strategy 46 11 Summary Gender Action Plan 50 12 Summary Resettlement Plan 52 13 Summary Financial Analysis 55 14 Summary Economic Analysis 58 15 Full List of Assurances 62

SUPPLEMENTARY APPENDICES A Sub-component Selection Criteria and Screening Process B Detailed Sector and Subsector Analysis C Policy Dialogue and Urban-Rural Policy Strategy Note D Detailed Project Description E Technical Analysis of Sub-components F Water Fund Pilot Demonstration Activity G Detailed Cost Estimates and Financing Plan H Institutional Arrangements I Procurement Capacity Assessment J Detailed Procurement Plan K Not used L Poverty and Social Assessment and Social Action Plan M Health Impact Analysis N Ethnic Minority Development Plan O Detailed Financial Analysis P Roads Funding and Sustainability Analysis Q Financial Management Assessment R Detailed Economic Analysis S Summary Environmental Impact Assessment and Environmental Management Plan T1 Fuling Component Report T2 Qianjiang Component Report T3 Youyang Component Report T4 Xiushan Component Report T5 Yunyang Component Report T6 Wushan Component Report T7 Chengkou Component Report T8 Fengjie Component Report

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report ABBREVIATIONS

AADT Annual Average Daily Traffic ADB Asian Development Bank AIDS Acquired Immunity Deficiency Syndrome AIEC Average Incremental Economic Cost ANOVA Analysis Of Variance AP Affected Person AusAID Australian Government Overseas Aid Program A&P Awareness and prevention CF Conversion Factor CMG Chongqing Municipal Government CNY China Yuan CPI Consumer Price Index CQPMO Chongqing Project Management Office CQS Consultants Qualifications Selection CSP Country Strategy and Program CSW Commercial sex worker CV Contingent Valuation CVM Contingent Valuation Method DFR Draft final report DI Ductile Iron DICL Ductile Iron Cement Lined DMF Design and Monitoring Framework DSCR Debt-service coverage ratio DRC Development and Reform Commission EA Executing Agency EBA Earnings Before Tax EBIT Earnings Before Interest and Tax EBITDA Earnings Before Interest, Tax, Depreciation, and Amortization EDR Equalizing Discount Rate EFS Engineering Feasibility Study EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMAB Ethnic Minority Affairs Bureau EMDF Ethnic Minority Development Framework EMDP Ethnic Minority Development Plan EMO External monitoring organization EMP Environmental Management Plan EOCC Economic Opportunity Cost of Capital EPA Entire Project Area EPB Environmental Protection Bureau ERD Economics and Research Department FA Financial Analysis FGD Focus group discussion FIA Financial Impact Assessment FIRR Financial internal rate of return FMA Financial Management Assessment FMAQ Financial Management Assessment Questionnaire FRP Fiberglass Reinforced Plastics

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report FSR Feasibility Study Report FYP Five-Year Plan GAP Gender Action Plan GDP Gross Domestic Product GHG Greenhouse Gas GRP Glass-reinforced Plastic HDPE High Density Polyethylene HH Household HIVS Human Immunodeficiency Virus IA Implementing Agency ICB International Competitive Bidding IDU Injecting drug user IEC Information, education and communication IEE Initial Environmental Examination IFO International Financing Organization IP Indigenous Peoples IPA Immediate Project Area IRR Internal Rate of Return KII Key Informant Interview LA Land Acquisition LCA Least-cost analysis LCB Local competitive bidding LCS Least-cost selection LDI Local design institute LIBOR London interbank offered rate lpcd liter per capita per day MDG Millennium Development Goals MEP Ministry of Environmental Protection MfDR Managing for development results MIS Management Information System MLG Minimum living guarantee MOF Ministry of Finance MSL Minimum Standard of Living NBS National Bureau of Statistics NCB National Competitive Bidding NDRC National Development and Reform Commission NGO Non-governmental Organization NPV Net Present Value NTFP Non-timber forest products NWF National Women’s Federation OD Origin-destination O&M Operation and Maintenance PAC Polyaluminium chloride PAH Project affected households PAP Project affected persons PBRA Project Benefits Reachable Area PCCP Prestressed Concrete Cylinder Pipe PCR Project Completion Report PCU/D Passenger car units per day PE Polyethylene

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report PLG Project Leading Group PMO Project Management Office PPA Poverty Partnership Agreement PPMS Project Performance Management System PPP Purchasing power parity PPTA Project Preparatory Technical Assistance PRC People's Republic of China PS Pumping Station PSA Poverty and Social Assessment PSP Private Sector Participation PVEC Present Value of Economic Costs QCBS Quality Cost Based Selection RC Reinforced Concrete RIA Road Influence Area RIB Resettlement Information Booklet RMB Renminbi RP Resettlement Plan RRP Report and Recommendation of the President SAP Social action plan SEIA Summary Environmental Impact Assessment SEPP Soil Erosion Prevention Plan SERF Shadow Exchange Rate Factor SIA Social Impact Assessment STD Sexually Transmitted Diseases STI Sexually Transmitted Infections SWM Solid Waste Management TA Technical Assistance TGR Traffic Growth Rate TOR Terms of Reference uPVC Unplasticized Polyvinyl Chloride USD United States Dollar VaW Violence Against Women VOC Vehicle Operating Cost WACC Weighted average cost of capital WatSan Water and Sanitation WBI Waterborne illness WF Women’s Federation WQM Water quality modeling WS Water Supply WTP Water Treatment Plant WWT Wastewater Treatment WWTP Wastewater Treatment Plant

CURRENCY EQUIVALENTS (Assumed) Currency Unit – Yuan (CNY) CNY1 = $.1471 $1 = CNY6.8

WEIGHTS AND MEASURES

km2 – square kilometer

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report m2 – square meter m3/day – cubic meter per day mu – Chinese unit of area (15 mu = 1 hectare)

NOTES

(i) The fiscal year (FY) of the Government of the People’s Republic of China ends on 31 December. (ii) In this report, "$" refers to US dollars.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

ACKNOWLEDGEMENTS

The TA Consultants would like to thank the following for their great assistance in furnishing and coordinating necessary data and information that made the writing of this report possible:

(i) The leaders and personnel of Chongqing Municipal Government (CMG), Fuling Government, Government, Youyang County Government, Xiushan County Government, Government, Government, Wushan County Government, Government, the relevant municipal and district/county Project Leading Groups and Project Management Offices (PMO), especially Chongqing Project Management Office (CQPMO), and the relevant municipal and district/county Construction Bureaus, Development and Reform Commissions, Finance Bureaus, Environmental Protection Bureaus, and other relevant Bureaus, departments, offices and committees (ii) The leaders and personnel of Chongqing Jianghe Engineering Consulting Center Co Ltd, which prepare the feasibility study reports for the Project (iii) The leaders and personnel of all institutes involved in the preparation of environmental impact assessment reports and resettlement plans for the Project (iv) Other stakeholders of the Project including institutions, organizations, enterprises and individuals in Chongqing Municipality and the subproject districts/counties (v) All relevant officials of Asian Development Bank that work on the Project, for their guidance and support

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

Project Location Map

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report EXECUTIVE SUMMARY

Background and Recent Progress

The TA is to assist Chongqing Municipal Government (CMG) to identify urban-rural road linkages and potable water supplies, expand and strengthen urban-rural links, facilitate economic development, enhance environmental protection and management, strengthen safeguards, support trade and commerce, facilitate employment generation, and raise income levels in the towns/townships of mountainous districts and counties in the eastern parts of Chongqing Municipality.

The TA has been implemented in three phases. The submission of the final report marks the completion of the third phase.

Project Description

The Project is a pioneering urban-rural infrastructure development initiative of the Chongqing municipal government (CMG), which furthers CMG’s commitment to reduce economic and social inequalities between its urban and rural areas. The Project provides new and improved rural roads and potable water supply systems to eight poverty districts/counties of Chongqing municipality, enhancing economic, public health, and environmental conditions for about 377,000 people. This will be achieved through physical and nonphysical investments in priority basic road infrastructure and capacity building support. The Project includes three components, (i) rural road construction and rehabilitation; (ii) water supply systems to boost service coverage, quality, and reliability; and (iii) project implementation support and targeted capacity building for the Project’s implementing entities on district and county-level governments.

The Project targets the poorer rural areas of Chongqing municipality, areas which have low per capita gross domestic product and suffer from poor infrastructure provision, primarily due to their relative remoteness, terrain difficulties, and either lack of water sources or lack of ability to harness them. Water supply and rural roads represent crucial infrastructure for these communities, and are intricately linked; the Project’s demonstration strength is to address water scarcity and water management while ensuring that selected areas are supported by road accessibility. By providing new and improved rural roads and water supply infrastructure, the Project supports CMG’s targeting of poverty-stricken and minority nationality counties, prioritizing production and improving living standards of communities in these outlying areas. This is consistent with ADB's strategic priorities for the PRC. The Project also supports the urban-rural development goals of the 11th Five-Year Plan (11FYP, 2006–2010) of the PRC, which promote equitable urbanization, balanced regional growth, and coordinated urban-rural development. It is also consistent with the State Council’s recognition of the nation's critical urban-rural development challenge, which has designated Chongqing as the first provincial-level pilot area for integrated urban-rural development.

By providing urgently-needed rural infrastructure, the Project supports CMG’s mode of comprehensive urban-rural development and expansion, while considering natural resource availability and enhancing synergy between roads and water supply sectors and their contribution to economic growth. The Project is consistent with ADB’s water policy, helping the PRC to achieve Millennium Development Goal 7, target 7.C. This goal establishes the 2015 target of halving the number of people without sustainable access to safe drinking water and improved sanitation. It also furthers ADB’s objective of making markets work more efficiently by providing infrastructure and promoting environmental sustainability.

By enhancing sustainable urban-rural development, the Project also supports both ADB’s long-term strategic framework, Strategy 2020 (2008–2020) 1 and the PRC Country

1 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008-2020. Manila.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Partnership Strategy (2008–2010) 2 by promoting efficient infrastructure, strengthening environmental management, and enhancing inclusive growth and balanced development. The Project also improves municipal service provision, supports urban-rural integration, and enhances rural town investment potential while protecting the environment. All in all, the Project contributes substantially to the Government’s overarching goal of continuing to build a xiaokang (moderately well-off) society, the primary goal of its 11FYP.

Rationale

The Project strengthens urban-rural linkages, and provides a replicable demonstration model for small-scale urban-rural roads and water supply development in eight poverty districts/counties. In these rural areas, poor road conditions severely restrict all-weather access for local communities within and between towns, while the lack of safe and reliable water supplies threatens public health and inhibits economic growth. The strategy of urban- rural integrated infrastructure development will adopt a mode of development and urban expansion which considers the availability and responsible management of the natural resources of Chongqing.

The Project serves as a demonstration project to support basic urban-rural infrastructure development in Chongqing’s poverty districts/counties through: (i) enhancing the synergy of water and roads infrastructure; (ii) improving technical designs, such as integrating climate change adaptation measures of proper slope protection and erosion control for roads; (iii) enhancing infrastructure planning and management; and (iv) strengthening the administrative capacities of implementing agencies and institutions. Its benefits include: (i) improved accessibility of rural communities to economic and social facilities and services; (ii) reduced transport costs of farm inputs to rural communities, and agricultural products to markets; (iii) creation of employment opportunities during project construction, operation, and maintenance, and later through new industries that will be located in the project area as a result of improved infrastructure; (iv) the alleviation of water shortages and improvement of water quality; and (v) local enterprise development through improved water supply and intra- county and village connectivity.

The Project’s capacity building initiatives will strengthen the operational sustainability and viability of the Project’s water supply systems, and facilitate operational and managerial improvements of existing urban and rural water supply providers. Through organizational restructuring, existing water services will improve, including reductions in water losses and overall operating costs. For the road sub-components, improved technical designs will result in lowered pavement and network maintenance costs, enhancing the long-term sustainability of the road infrastructure.

The Project also strengthens community-based environmental awareness through a water and sanitation public education campaign, which has strong local replication potential by piloting peer to-peer-learning and building of a network of trained women on hygiene and health awareness, tariffs, and public consultation in two of the Project counties. This is proposed as a pilot demonstration activity (PDA) under RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program.

Extensive policy dialogue has been conducted with local authorities in water-scarce areas to select and define sub-components in order to maximize the Project’s impact on potable water services provision. The Project’s rural roads will provide access to these and other peri-urban areas, providing vital connectivity to stimulate economic growth and help these areas cope during times of natural disasters, such as during seismic and climate change events.

Impact and Outcome

2 ADB. 2008. Country Partnership Strategy (2008-2010): People’s Republic of China. Manila.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report The Project’s impact is an improved urban-rural environment and enhanced public health and quality of life for residents of affected poverty districts/counties. Impacts accruing from rural road sub-components include: (i) improved community connectivity and accessibility and inter-township and county transport integration; (ii) improved travel safety and efficiency; (iii) lowered transport costs; (iv) enhanced year-round farm-to-market access; (v) better all- weather access to economic and social facilities such as schools, hospitals, clinics, markets and recreational facilities; (vi) improved emergency transit during times of natural calamities; and (vii) reliable access to employment in more distant locations.

Impacts accruing from water supply sub-components include: (i) the elimination of water shortage constraints; (ii) improved water quantity and quality, and improved public health; (iii) enhanced productivity through a reduction in waterborne illness; (iv) the elimination of water carrying especially for women and children; and (v) opportunities to develop food processing and other economic activities, which were previously unsustainable due to the lack of potable piped water.

Water supply and rural road connectivity, taken together, will promote more synergistic and sustainable integrated urban-rural development through both their demonstration impact, and by strengthening the economic base of affected districts/counties. The subproject areas have significant potential for agro-industrial growth and promotion of services. Where road and water supply components are undertaken in isolation, their positive impacts directly accrue to the rural beneficiary population. Where they occur in combination, roads will support water availability for processing activities at the urban-rural interface.

Output

21 road sub-components including new and upgraded urban-rural roads in Fuling and Qianjiang Districts; and Youyang, Xiushan, Yunyang, Fengjie, Wushan and Chengkou Counties opened to traffic

9 water supply sub-components including new water treatment plant, pipelines, and associated facilities to supply potable water in Youyang, Yunyang, Fengjie, Wushan and Chengkou Counties

Environment and hygiene awareness and training program

Separate awareness training for men and women on health and safety and HIV/STIs prevention during contractor mobilization

Project Investment Plan

The project investment cost is estimated at $213.4 million, including taxes and duties of $5.2 million. The total cost includes physical and price contingencies, interest, and other charges during implementation.

Financing Plan

Amount ($ million equivalent) Source % Total Foreign Local Asian Development Bank a 100.00 48.95 51.04 46.9 RETA 6498: Knowledge and Innovation Support for ADB's 0.05 0.05 0.00 0.0 Water Financing Program District/County Governments 113.39 10.60 103.21 53.1 Total 213.44 59.60 154.24 100.0 a Interest during construction has been computed at the 5-year forward London interbank offered rate on 12 November 2009 plus a spread of 0.20% and a commitment fee of 0.15% on undrawn balance. Source: Asian Development Bank estimates.

The Government of the PRC has requested a loan of $100 million from ADB’s ordinary capital

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report resources to finance 46.8% of the project cost under ADB’s London interbank offered rate (LIBOR)-based lending facility. The loan will have a 25-year term including a grace period of 5 years, an interest rate determined in accordance with ADB’s LIBOR-based lending facility, a commitment charge of 0.15% per annum, and such other terms and conditions set forth in the draft loan and project agreements. The loan will cover civil works, equipment, project management consulting services, and capacity building. The Government will finance financial charges during construction and contingencies.

Allocation and Relending Terms

Under fund transfer arrangements, the PRC Government will make the loan proceeds available to CMG, and then from CMG to the concerned district/county governments. The district/county governments will transfer or onlend the loan proceeds to the end-borrowers (project implementing units). The terms and conditions of the Loan proceeds will be the same as those of the Loan, with the end-borrowers bearing the foreign exchange and interest rate variation risks.

Period of Utilization

Until 30 June 2016

Estimated Project Completion Date

31 December 2015

Implementation Arrangements

CMG is the Executing Agency (EA) for the Project and assumes overall responsibility for Project implementation. It will also be responsible for the day-to-day implementation of the Project’s capacity building activities. CMG has established a Project Leading Group (PLG) at the municipal-level to provide policy guidance on Project implementation. The PLG is chaired by a CMG Vice-Mayor and includes the CMG Deputy Secretary-General, and senior officials from CMG’s Development and Reform Commission, Finance Bureau, Poverty Alleviation Office, Transport Commission, Water Resource Bureau, Audit Bureau, Environmental Protection Bureau, Land Resources Bureau, Resettlement Bureau, and Construction Bureau as members.

Executing Agency

Chongqing Municipal Government

Procurement

All procurement to be financed under the loan will be carried out in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Contract packages for the sub-components have been formulated in consultation with the Government, and a procurement capacity assessment of the EA and implementing agencies (IAs) has been undertaken. Civil works contracts valued over $10 million and contracts for goods and related services above $1.0 million shall follow ADB procedures for international competitive bidding (ICB). Civil works contracts valued at $10 million or less and contracts for goods and related services at $1.0 million or less will be procured following national competitive bidding (NCB) procedures acceptable to ADB;3 packages for goods and related services valued at $100,000 and less and civil works valued at $200,000 and less will be procured through shopping procedures. The selection and engagement of contractors and suppliers will be subject to ADB approval.

3 ADB will require the EA to use ADB-approved standard bidding documents to ensure high quality and consistency of the documents; this will facilitate ADB review.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

Consulting Services

The Project includes provision for funding 22 person-months of international and 200 person-months of national consulting services to support the Chongqing project management office (CPMO), the district/county project management offices (PMOs), and the Project management teams in project implementation and management, and institutional capacity building. The consulting package is to be provided through a consultancy firm that will be selected using quality- and cost-based selection (QCBS) in accordance with the Guidelines on the Use of Consultants by Asian Development Bank and its Borrowers (2007, as amended from time to time).

Project Benefits and Beneficiaries

The Project will directly benefit about 377,000 people4 in Chongqing, of which about 47,000 or 12.4% are poor. All residents in the Project’s eight poverty districts/counties will benefit indirectly, as their living conditions will improve as a result of (i) improved water quality and quantity; (ii) reduced use of polluted water sources; (iii) reduced incidence of waterborne diseases and associated reduction in medical costs; and (iv) reduced pollution loads on air, water, and land due to improved roads and water treatment. The Project will have a positive impact on the urban environment including the poor through improved water supply, and roads construction and rehabilitation. The Project will generate employment during the construction and operation phases of infrastructure. Women and children are expected to feel health benefits disproportionately. The Project also indirectly supports ADB’s broader Clean Energy and Environment Program (2008) through enhancing water resources management, and improved road network facilities.

The Project will contribute to poverty reduction by ensuring that targeted poor communities have access to safe and reliable water supplies and upgraded and expanded rural road networks, which will incrementally improve living conditions and provide better and safer access to jobs and social services for existing residents and new migrants in the districts/counties. The Project’s water supply and roads improvement initiatives will stimulate investment in industry, resource extraction, and the services sector.

An estimated 70%-80% of the construction jobs created by the Project are unskilled jobs, and are likely to be filled by local labor. A minimum of 30% of new employment opportunities will be prioritized for women, the poor and ethnic minorities during the construction phase. Since unemployment is a primary cause of poverty in the Project areas, the poor therefore stand to benefit disproportionately from jobs created by the Project. In total, an estimated CNY44.7 million ($6.57 million) in employment benefits will be generated in the poverty districts/counties of Chongqing.

The Project will also reduce the incidence of waterborne and respiratory diseases. Investments in improved water supply in ten towns/townships of the five counties (Chengkou, Fengjie, Wushan, Youyang, and Yunyang) are anticipated to decrease medical expenses related to waterborne diseases by about CNY6–CNY10 million ($880,000-$1.47 million) per year over the period 2014–2033. The share of that reduction calculates as savings to households of CNY4–CNY5 million ($590,000-$740,000).

Risks and Assumptions

The Project does not have any unusual technical risks; conventional engineering designs with proven reliability and performance will be adopted for all water supply and road investments. Mitigating measures will be adopted to address any risks identified during detailed design of physical improvements. During implementation, the Project

4 Beneficiaries for roads and water supply are 184,000 and 209,000 people respectively. Common beneficiaries are 16,000 people. In effect, there are 377,000 beneficiaries combined.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report implementation consultant will guide and support the CPMO, district/county PMOs, and implementing units (IUs) to ensure that equipment and works comply with the design requirements and quality assurances.

The following risks could affect timely implementation and realization of Project outputs and benefits: (i) lack of strong Project coordination between CPMO, district/counties PMOs, and the Project management teams in the synchronization of Project activities and requirements, (ii) delays in implementing land acquisition and resettlement programs, (iii) delays in the provision of counterpart funding, particularly for road sub-components, (iv) lack of sustainable O&M for physical sub-components, and (v) difficulties in complying with ADB’s procurement procedures.

Risk (i) will be mitigated through, (a) continuation of CPMO’s web-based project management information system, (b) extensive coordination support from the Project implementation consultants, (c) close Project monitoring by CPMO, especially during initiation phases, and (d) frequent CPMO on-site inspections and regular coordination meetings. Risk (ii) will be mitigated by expeditious implementation of the detailed measurement surveys (DMS), early availability of AP compensation funding, and strict operational compliance with the RPs. Risk (iii) will be mitigated through covenanted assurances from the district/county governments for timely provision of counterpart funding and direct CPMO coordination with them. Risk (iv) will be mitigated through significant long- term capacity building to water supply and road maintenance O&M agencies. Risk (v) will be mitigated through early mobilization of the external procurement specialists to provide intensive initial training and ongoing technical support.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

1 INTRODUCTION

1.1 Background of the TA

During the Country Programming Mission in December 2007, the People’s Republic of China (PRC) confirmed its request for assistance from the Asian Development Bank (ADB) to finance the proposed Chongqing Urban–Rural Infrastructure Development Demonstration Project. Financing will be under a sector loan to improve infrastructure facilities and municipal services, support employment generation, improve rural living conditions, and reduce poverty in a range of towns and villages. The project preparatory technical assistance (TA) is scheduled for processing in 2008. A Fact-Finding Mission was conducted from 20 May–5 June 2008 in Chongqing.

1.2 Objectives of the TA

The objectives of the TA are to assist Chongqing Municipal Government (CMG) to: (i) identify the most appropriate municipal infrastructure, urban–rural road linkages, and potable water supplies; expand and strengthen urban–rural links; facilitate economic development; enhance environmental protection and management; strengthen safeguards areas; support local trade and commerce; facilitate employment generation; and raise income levels in the towns of mountainous districts and counties in Chongqing; (ii) prepare feasibility studies for an investment sector project based on detailed assessment of ten subprojects in the northeast and southeast regions of Chongqing; (iii) provide training to local design institutes and implementing agencies (IAs) to increase institutional capacity—specifically aimed at project planning, preparation and implementation procedures—to an international standard; (v) formulate measures for sustainability of the Project including sustaining improved capacity of local governments; and (vi) design the Project for possible funding by the ADB.

The outcome of the TA will be a project design agreed to by the PRC and ADB, and completed feasibility study reports (FSRs). The project design will include a demonstration and capacity development effect. The TA will assist the respective district/county governments to (i) review and identify selection parameters for the priority listing of towns/townships to form the subprojects; (ii) review and assess the scope of the most appropriate components to fulfill project strategy goals; (iii) prepare feasibility studies for the components of subproject districts/counties; and (iv) prepare districts/counties’ integrated urban-rural roads and water supply development and environmental improvement projects, including environmental impact assessment, environmental management plan, social analysis, economic and financial analysis and resettlement plan in line with ADB policies and guidelines. The TA will also identify institutional capacity building measures in urban-rural institutional and environmental management and policy reforms to ensure the sustainability of the Project and related facilities. The output of the TA will be workshops and a series of reports recommending approaches necessary in achieving least-cost, sustainable solutions for integrated and coordinated town/township urban-rural development and environmental improvement that will advance the Government’s development master plans and assist in improving living conditions, particularly those of the poor. The TA will also help the CMG develop methodologies for integrated urban-rural development of the poverty districts/counties that are appropriate for replication across Chongqing municipality and elsewhere in the PRC.

In formulating an overall project proposal suitable for ADB financing, the TA follows ADB’s guidelines in addressing environmental and poverty and social issues pertaining to resettlement, gender, and indigenous peoples/ethnic minorities. Household surveys are conducted to address such issues as public awareness and affordability. Consultation workshops and tripartite meetings are scheduled strategically during TA implementation, and also identify the stakeholders and develop a participatory approach to the design of the Project.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 1.3 Scope of the TA

The TA is being implemented in three phases.

Phase 1, the Inception Phase, lasting for 1.5 months, comprised studies to (i) assess constraints to economic development, adverse environmental impacts of inadequate water supplies in district/county towns/townships, and lack of appropriate road infrastructure; (ii) review Chongqing Municipal Government (CMG)’s town/township-level economic development strategies, priorities, and investment plans; (iii) identify problems associated with inadequate access to water supplies and rural roads in the subprojects; (iv) review the likely resettlement impact of the subprojects; (v) develop a project design and monitoring framework (DMF); (vi) provide guidance to CMG’s design institutes on feasibility study report (FSR) preparation; and (vii) prepare an inception report.

During phase 2, the Interim Phase, lasting for 3.9 months, the TA has (i) assessed the potential impacts of the proposed components based on technical, institutional, environmental, social and ethnic, economic, financial, and other factors; (ii) formulated balanced infrastructure development strategies comprising structural and nonstructural measures; (iii) updated FSRs’ components; (iv) assisted CMG to prepare draft environmental impact assessments (EIAs), resettlement plans, social development plans, and ethnic minority development plans according to ADB’s guidelines and policies, and conduct public consultations and disclosure of relevant information; (v) developed technical, thematic, and safeguards assessment guidelines for evaluating subprojects during project implementation; (vi) refined the DMF through a stakeholder workshop in each subproject district/county; and (vii) prepared an interim report.

Phase 3, lasting 1.5 months, assisted CMG to (i) formulate an investment project for ADB funding; (ii) consolidate FSRs prepared in Phase 2; (iii) formulate procurement needs and arrangements; (iv) justify the subprojects in respective financial, economic, social, and environmental terms, and finalize the detailed project costs, financing plan, institutional strengthening components and project management and monitoring procedures, and prepare the terms of reference for the project management and institutional strengthening component; (v) audit CMG design institutes’ FSRs; (vi) prepare a best practice strategy for linking urban and rural development infrastructure in areas where there is a strong interrelated economy; and (vii) prepare a draft final report. The TA Consultants issue the final report after receiving comments from ADB and CMG not more than 6 weeks after the issue of the draft final report.

1.4 Deliverables of the TA

ADB has determined the dates for TA deliverables as shown in Table 1-1.

Table 1-1: Agreed Dates for Deliverables

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Submission Deliverable Date 27 March Inception Report 2009 15 June Interim Report 2009 Draft Final Report, which includes the Summary Environmental Impact Assessment (SEIA), Environmental Management Plan (EMP), 7 Resettlement Plan (RP), Ethnic Minority Development September Plan (EMDP), Poverty and Social Analysis (PSA) and 2009 Summary Poverty Reduction and Social Strategy (SPRSS) Final Report, which includes the Summary Environmental Impact Assessment (SEIA), Environmental Management Plan (EMP), 30 Resettlement Plan (RP), Ethnic Minority Development December Plan (EMDP), Poverty and Social Analysis (PSA) and 2009 Summary Poverty Reduction and Social Strategy (SPRSS)

The interim report was to be submitted on 15 June 2009 but due to changes in scope of the Project and delays in the revisions of the feasibility study reports and in the start of the social surveys, it was agreed that the interim report be submitted on 23 July 2009.

The draft final report was to be submitted on 7 September 2009. The main body of the report was submitted on 7 and 8 September 2009 but due to the large amount of components and the coordination work needed, the financial and economic parts were submitted later up to 18 September 2009.

The final report is submitted in late February 2010 as required by ADB to submit it after the loan appraisal mission.

1.5 Conduct of the TA

The contract between the ADB and the TA Consultants5 for the Chongqing Urban-Rural Infrastructure Development Demonstration Project Preparatory Technical Assistance was concluded on 3 December 2008. Consistent with the Bank’s Notice to Proceed, the TA Consultants began fielding the specialists on 10 February 2009. The project office for the TA Consultants in Chongqing metropolitan area was established with PMO assistance. A kick-off meeting between the TA Consultants and the PMO was held on 11 February 2009, and the initial round of field visits to the subproject districts/counties was held over the period 12–28 February 2009.

During the Inception Phase from 10 February to 27 March 2009, the TA Consultants carried out the following tasks:

(i) Presentation to Chongqing PMO and subproject district/county PMOs of lists of information needed and relevant questionnaires and forms to be filled, collection and interpretation of the information and data, and follow-up (ii) Initial review and assessment of background information and reports related to the Project, including draft FSRs, EIAs and RPs prepared by the local design institutes (LDIs), statistical yearbooks (municipal and district/county level), district/county master plans, and conveyance of comments (iii) Meetings, discussions and liaison with Chongqing PMO, subproject district/county PMOs, IAs, and concerned Bureaus, departments, and agencies, and LDIs that

5 Metcalf & Eddy Ltd., the TA Consultants, after contract signing, has been integrated into AECOM Asia Co. Ltd. on 1 May 2009.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report prepared the reports related to the Project, including furnishing of advice and comments with the PMOs, IAs and LDIs on those areas that may need to be substantiated, justified and revised (iv) Site visits to the subproject districts/counties (v) Conduct of stakeholder analyses (vi) Establishment of the TA office including logistics (vii) Purchase of office equipment funded under the TA (viii) Preparation of the draft questionnaire for the social-economic household sample survey (ix) Preparation of the draft design and monitoring framework (x) Preparation of the TA inception report

An ADB TA Inception Mission visited Chongqing Municipality from 13 to 25 April 2009. The purpose of the Mission was to (i) review the work and coordination undertaken and the logistics arrangements made; (ii) issues that may affect the next phase of TA implementation; (iii) conduct due diligence on technical, safeguards, institutional, economic and financial aspects for subproject roads and water supply components; and (iv) discuss resources, work plan and further implementation schedule of the TA. A tripartite meeting was held on 22 April 2009 to discuss the above and the objectives and problems related to development of the subproject districts/counties. A wrap-up meeting was held on 22 April 2009 to discuss the Mission findings.

An ADB TA Review Mission comprising visited Chongqing Municipality from 9 to 18 June 2009. The purpose of the Mission was to (i) review the work and coordination undertaken after the inception mission; (ii) issues that may affect the next phase of TA implementation; (iii) conduct due diligence on technical, safeguards, institutional, economic and financial aspects for the selected subproject roads and water supply components; and (iv) discuss resources, work plan and further implementation schedule of the TA. A tripartite wrap-up meeting was held on 18 June 2009 to discuss the above, the objectives and problems related to the development of the subproject districts/counties, and the Mission findings.

During the Interim Phase from 28 March to 23 July 2009, the TA Consultants carried out the following tasks:

(i) Review and assessment of information and reports related to the Project, including draft FSRs, EIAs and RPs and district/county master plans, close coordination, meetings, discussions and liaison with Chongqing PMO, subproject district/county PMOs, IAs, and concerned Bureaus, departments, and agencies, and LDIs, including furnishing of advice and comments on those areas that may need to be substantiated, justified and revised (ii) Site visits to the subproject districts/counties (iii) Draft of the DMF (iv) Confirmation of alignments for road components and scope of water supply components (v) Institutional assessment of road transport institutions in at district and town/township level and discussion on the findings (vi) Conduct of household socio-economic surveys (vii) Conduct of resettlement training for districts/counties (viii) Preparation of the TA interim report

The implementing agencies have prepared the required information and data and the FSRs, EIAs and RPs, which have been revised according to comments furnished by the TA Consultants and ADB. Chongqing PMO coordinates with the subproject PMOs, IAs and institutes to expedite revision of the necessary reports. The TA Consultants also directly contact the IAs and institutes to enhance efficiency and effectiveness of TA implementation and to ensure timely submission of reports to ADB and the Chongqing EA, and keep Chongqing PMO and ADB apprised of such direct exchanges with the IAs.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report The TA Consultants submitted the interim report on 23 July 2009.

A TA Interim Review Mission visited Chongqing Municipality from 6 to 14 August 2009. The purpose of the Mission was to (i) review the interim report findings and validation of agreements reached so far; (ii) issues that may affect the next phase of TA implementation; (iii) conduct due diligence on technical, procurement, safeguards, institutional, economic and financial aspects for subproject roads and water supply components; and (iv) discuss resources, work plan and further implementation schedule of the TA. A tripartite meeting was held on 13 August 2009 to discuss the above, the objectives and problems related to development of the subproject districts and counties, and the Mission findings. The Mission held various practical training workshops in close collaboration with Chongqing PMO and TA Consultants on procurement packaging, cost estimates, financing plan, safeguards compliance, technical, economic and institutional aspects, scoping of capacity building requirements and other requirements to IAs and local PMOs. ADB and domestic processing and implementation requirements, roles of EA and IAs, budgets and monitoring mechanisms were clarified.

ADB forwarded comments on the Interim Report from late July to mid-August 2009. The TA Consultant incorporated the comments from ADB and Chongqing and subproject PMOs in implementing the subsequent phase of the PPTA and preparing the draft final report.

A Loan Fact-finding Mission was held from 12 November to 4 December 2009, first in Chongqing and then in Beijing.

A Loan Appraisal Mission was held from 1 to 5 February 2010.

The work schedule (up to completion) is presented in Table 1-2.

Table 1-2: Work Schedule

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 10 February 2009 Mobilization 10 February—March Initial site visits, and stakeholder workshops 2009 10 February—July PMOs, IAs and LDIs to furnish required data 2009 Late March—May IAs submit the first draft of EIAs 2009 27 March 2009 Submission of inception report 29 March—3 April ADB environmental mission 2009 1 April 2009 ADB environmental training 13—22 April 2009 ADB inception mission Mid—Late April 2009 ADB social and resettlement mission April—May 2009 ADB social and resettlement training April—August 2009 LDIs revise and perfect the FSRs, EIAs and RPs in accordance with comments from TA Consultants and ADB. PMOs and IAs furnish required information, confirm the scope and cost estimates of the subprojects, and draft procurement plan. April—July 2009 EIA public consultation June 2009 Socio-economic household survey May—July 2009 IAs submit the first draft of RPs 10—22 June 2009 ADB review mission June 2009 ADB disbursement and procurement training June 2009 ADB DMF training and workshop 23 July 2009 Submission of interim report 6—14 August 2009 ADB interim mission 7—18 September Submission of draft final report, which includes PSA and SPRSS 2009 October 2009 Submission of SEIA and EMP November 2009 Submission of RP November 2009 Submission of EMDP November 2009 Domestic approval of EIAs 12 November—4 ADB loan fact-finding mission December 2009 December 2009 Domestic approval of FSRs January 2010 Uploading of SEIA to ADB website 12 January 2010 ADB Management Review Meeting 1—5 February 2010 ADB loan appraisal mission February 2010 Submission of final report Note: ADB=Asian Development Bank, DMF=design and monitoring framework, EIA=environmental impact assessment, EMDP=ethnic minority development plan, EMP=environmental management plan, FSR=feasibility study report, IA=implementing agency, LDI=local design institute, PMO=project management office, PSA=poverty and social assessment, RP=resettlement plan, SEIA=summary environmental impact assessment, SPRSS=summary poverty reduction and social strategy, TA=technical assistance

1.6 Training provided by TA Consultants and ADB in the missions

Representatives of the TA Consultants and ADB provided the following training in interactive workshops and discussions to officials of Chongqing PMO, subproject district and county PMOs and IAs, and the various local design institutes preparing the feasibility study reports, environmental impact assessments, and resettlement plans for the Project.

Mission Contents of Training provided by TA Consultants and ADB Technical aspects of road components Technical aspects of water supply components Inception Mission Procurement plan Environment impact assessment Resettlement plan Technical aspects of road components Institutional and financial issues Environment impact assessment

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Resettlement plan Procurement plan and disbursement Design and monitoring framework Economic assessment models Procurement guidelines, templates and packaging Cost estimates, financing plan and financial analysis and sustainability Safeguards compliance Interim Mission Institution and implementation arrangements Technical and economic aspects Scoping of capacity building requirements Project demonstration features

The training provided has helped the integration of all aspects (management, general, technical, social, resettlement, financial, economic, environmental, institutional, procurement, implementation etc) of the work of the TA Consultants, ADB, the EA, the PMOs, IAs and LDIs, and enabled the EA and IAs understand the requirements of ADB processing (and the relation with PRC domestic processing) in project preparation and project implementation.

1.7 Variations to the Contract

Contract Variation No. 1 was proposed on 10 May 2009 to increase the input of the international social specialist by 0.5 month and add a domestic ethnic minority specialist for 1.5 month to carry out the ethnic minority work, and add a domestic economist for 3 months to share the existing domestic economist’s work. Contract Variation No. 2 was proposed on 12 May 2009 to change the TA Consultants from Metcalf & Eddy Ltd. to AECOM Asia Co. Ltd. Both Contract Variations No. 1 and 2 were approved on 15 July 2009 as Contract Variation No. 1. Contract Variation No. 3 was proposed on 25 August 2009 to cut off the remaining input of the international resettlement specialist and transfer the budget saved to the domestic specialist, increase the budget of the household socio-economic household surveys, focus group discussions and meetings, and key Informant Interviews, increase the input of the international environmental specialist to strengthen the environmental work in view of the weak capacity of the EIA institutes, increase the input of the domestic geotechnical engineer to guide the local design institute on the geological work associated with realignment of the road component in Xiushan County, increase the input of the domestic financial specialist in view of the large amount of work in the costing, financial plan and financial management assessment, increase the input of the domestic ethnic minority specialist to prepare the EMDPs, and add an information technology engineer to prepare a web site to improve the information flow and present the demonstration features of the Project. Contract Variation No. 4 was proposed on 18 January 2010 to adjust the inputs of the international team and associated per diem.

1.8 Equipment Procured

The TA Consultants have finalized and procured office equipment as shown in Table 1-3 for the TA with the help of Chongqing PMO and the approval of ADB.

Table 1-3: Office Equipment Purchased Equipment Model & Specifications Quantity 1st batch Desktop Lenovo T4900V (AX2 5000+, 2G DDRII, SATA 250G) 3 in Lenovo IdeaPad Y530-AP8400 (Duo2, 4G DDRIII, Laptop 2 February 320G) 2009 Facsimile Machine HP4580 1 Wireless Router TP-Link 841G 1 Router Mercury 816 1 DV Sony DCR-SR45E (40G HDD) 1 DC Canon EOS 5D Mark II 1 Laser Printer HP 2025DN (A4 size) 1 SONY CX21 1 Projector TOSHIBA TLP-X100 (Ultra-slim) 1

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Switch TP-Link 1 Removable Hard Disk 160G 2 Copier Fuji Xerox 2003 (20 p/min) 1 Memory of copier Memory of Fuji Xerox copier 2003 1 2nd batch Memory of printer Memory of HP2025 printer 1 in July Laser HP1007 laser printer 1 2009 Printer Anti-virus software Ruixing anti-virus software 1

1.9 Structure of the Final Report

The final report presents the findings of the TA. The report’s structure mirrors that of an ADB RRP. The main report comprises the following sections:

(i) Executive Summary (ii) Introduction (iii) Rationale: Sector Performance, Problems, and Opportunities (iv) The Proposed Project, describing the inputs and activities required to prepare design outputs, cost estimates, financing plan, and implementation arrangements (v) Technical Analysis of Engineering Feasibility Studies (vi) Project Benefits, Impacts and Risks, assessing social and poverty impact, resettlement, financial and economic impact, environmental impact assessment, institutional development, and project risks and mitigation measures (vii) Specific Assurances, which need to be considered for inclusion in the ADB loan and project documents

The appendices include a design and monitoring framework (Appendix 1), a sector and subsector analysis (Appendix 2), development coordination (Appendix 3), a detailed description of sub-components (Appendix 4), summary cost estimates and financing plan (Appendix 5), onlending arrangements and indicative funds flow (Appendix 6), details of project organization (Appendix 7), an implementation schedule (Appendix 8), a summary and detailed procurement plan (Appendix 9), a summary poverty reduction and social strategy (Appendix 10), a summary gender action plan (Appendix 11), a summary resettlement plan (Appendix 12), a summary financial analysis (Appendix 13), a summary economic analysis (Appendix 14), and a full list of assurances (Appendix 15).

The Supplementary Appendices include sub-component selection criteria and screening process, detailed sector and subsector analysis, a policy dialogue and urban-rural policy strategy note, a detailed project description, a technical analysis of sub-components, details of water fund pilot demonstration activity, detailed cost estimates and financing plan, institutional arrangements, a procurement capacity assessment, a detailed procurement plan, a poverty and social assessment and social action plan, a health impact analysis, an ethnic minority development plan, a detailed financial analysis, a roads funding and sustainability analysis, a financial management assessment, a detailed economic analysis, a summary environmental impact assessment and environmental management plan, and components reports of the eight components.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 2 RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES

2.1 Performance Indicators and Analysis

1 The economy of the PRC has developed rapidly since the reform policy of 1979, achieving an average annual growth rate of 9.8% for nearly three decades. PRC’s gross domestic product (GDP) reached $3.37 trillion in 2008, and its urban population has more than tripled from 190 million (1980) to 607 million (2008), now accounting for over 45% of the national population, and expected to reach 56% by 2020. Despite these high levels of growth and urbanization, there are wide regional disparities in both economic development and physical infrastructure provision, including roads, railways, power, water supply and sanitation. The western region, which is home to many of the country’s poor, has not benefited from the growth and reforms as much as the eastern (coastal) region.6 Most of the western region lacks access to safe potable water supplies, and of its rural road network, nearly two thirds of roads are still unpaved.7 Of the 16 provinces for which the rural piped water supply coverage rate is below the national average (58%), half are located in the 12 western region provinces.8

2 In 1999, the PRC Government announced its official plans to develop the western region, aiming to balance economic growth, stimulate economic development and raise living standards. Although growth has accelerated, the western region still lags well behind the eastern (coastal) region, which in 2008 contributed 59.9% of national GDP against the western region’s 17.8%. The per capita GDP in the western region is only 69.0% of the national average, and out of an estimated 35.5 million low-income people in the PRC, 55.9% live in the western region.9 The proportion of low-income people to the total rural population is 8.6% in the western region; nearly eight times that of the eastern region. A rural survey (2006) indicated that in the western region, only 42.9% of rural residents have piped water supply, with 22.2% having difficultly in obtaining safe drinking water; in the eastern region the corresponding figures are 71.1% and 2.8% respectively. 10 In the western region, the percentage of villages accessible by paved roads is 27.6%, while in the eastern region it is 81.2%.11

3 To address these regional disparities, the Western Region Development Bureau, which is affiliated to the State Council, released a list in 2008 of 10 major projects with a combined budget of CNY436 billion ($64.1 billion).12 Also, in the PRC’s 11th Five-Year Plan 2006–2010 (11FYP), the Government places inclusive and balanced regional development as a key strategic priority, addressing environmental protection and pollution control issues along with promoting the sustainable development of basic infrastructure.

4 In Chongqing, which is located in the southwestern part of the PRC and about 50% rural, the proportion of 8,967 villages with paved roads was only 38.6% in 2008. Roads are inadequate in many areas, with poor pavement surfaces, and frequently becoming impassable during the wet season due to erosion and flooding. The poor road conditions

6 The PRC’s western region covers six provinces, five autonomous regions, and one municipality (Chongqing). 7 http://www.moc.gov.cn/2006/moc2gov/zhengwugg2gov/200706/t20070618_277269.html (website of Ministry of Communications of the PRC). 8 ADB; Safe Drinking Water and Sanitation for the Rural Poor – Final Report, TA 4215-PRC, Beijing (August 2005). 9 Based on a survey (2006) on 68,000 rural households in 31 provinces (including autonomous regions and municipalities): http://www.sannong.gov.cn/ (Rural Data Net). 10 http://www.stats.gov.cn/tjgb/nypcgb/qgnypcgb/t20080226_402464495.htm (website of National Bureau of Statistics of China). 11 http://www.moc.gov.cn/2006/moc2gov/zhengwugg2gov/200706/t20070618_277269.html (website of Ministry of Communications of the PRC). 12 These projects included a new railway line connecting Lanzhou and Chongqing, and ( Province) highway, airport expansion projects in Chengdu and Chongqing, hydropower stations, coal mines, gas and oil transmission lines as well as public utility projects in the western region. As of end 2007, the PRC had started 92 key construction projects in the western region, amounting to about CNY1.3 trillion ($190 billion).

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report severely restrict mobility, access and safety, and limit economic activity. In 2008, about 2,000 poor villages in Chongqing experienced water shortages, threatening the public health of communities through the proliferation of waterborne diseases, such as dysentery.13 Existing piped water supply systems suffer from poor design, construction and maintenance, high water losses and high operating costs.

5 In 2008, Chongqing’s per capita GDP of CNY18,025 ($2,657) was 20% lower than the national average of CNY22,640 ($3,329). There is also considerable regional disparity in Chongqing’s GDP; in the 23 districts/counties of its central ‘one-hour economic circle’, the GDP is CNY395.9 billion ($58.2 billion) or 78.0% of Chongqing's total GDP; compared with CNY85.7 billion ($12.6 billion) or 16.8% in the northeast region; and only CNY28.0 billion ($4.1 billion) or 5.5% in the southeast region where most ethnic minorities reside.14 Further, the urban-rural income gap was 3.8:1 in 2008, higher than the national level of 3.3:1. This is due to the under-developed economy which largely results from the lack of basic infrastructure development in the rural poverty districts/counties, caused partly by difficult geologic and topographic conditions.

6 Chongqing municipal government (CMG) is committed to reduce economic and social inequality between its urban and rural areas.15 The 11th Five-Year Plan (11FYP, 2006– 2010) identifies urbanization as a key development objective, emphasizing the balance of regional growth promotion with development equity through more coordinated urban–rural infrastructure improvements and the strengthened development of urban settlements around its metropolitan areas. CMG is targeting its poverty-stricken and minority nationality regions, prioritizing production and living condition improvements in these areas. This is consistent with ADB's strategic priorities in the PRC.

7 The Project targets the poorer rural areas of Chongqing municipality, areas which have low per capita GDP and suffer from poor infrastructure provision, primarily due to their relative remoteness, terrain difficulties, and either lack of water sources or lack of ability to harness them. Water supply and rural roads represent crucial infrastructure for these communities, and are intricately linked; the Project’s demonstration strength is to address water scarcity and water management while ensuring that selected areas are supported by road accessibility.

8 The Project also supports CMG’s adopted mode of comprehensive urban-rural development and expansion while considering the availability of natural resources. It supports the peri-urban development and expansion of selected areas that have sufficient water and can manage it well. The Project has conducted extensive policy dialogue with local authorities in water-scarce areas to select and define sub-component arrangements in order to maximize the Project’s impact on potable water provision. Project roads will provide access to new peri-urban areas and also provide the necessary connectivity to cope well with natural disasters, such as those caused by seismic events and climate change.

9 The Project is consistent with ADB’s water policy and will help the PRC achieve Millennium Development Goal 7, target 7.C, which establishes the 2015 target of halving the

13 “Cost of Pollution in China, Economic Estimates of Physical Damages”, World Bank, February 2007. 14 One Hour Economic Circle was conceptualized in 2006, and CMG plans to spend 15 years to build this center of Chongqing into a full-fledged economic region with urbanization rate of 75% and 80% of total GDP of Chongqing. It refers to "the largest cluster of cities in western China," within one-hour traveling distance from the urban core (consisting of nine districts), with aggregation impact and competitive advantage. The area of the “One Hour Economic Circle’, and the northeast and southeast wings is 25,600, 36,900 and 19,900 km2, respectively. In 2008, the registered population of the “One Circle’, and the northeast and southeast wings is 18.2, 10.8, and 3.6 millions, respectively. 15 On 9 June 2007, the central government announced a new national development policy to further strengthen Chongqing's position in the development of Western region. Chongqing and Chengdu were selected and approved by NDRC as pilot reform cities to pursue coordinated and balanced development of rural and urban areas through reforms in all sectors to establish models that can be replicated in other Chinese areas. The ultimate objective of balanced development is to make sure that rural farmers and migrant workers can enjoy the same rights, public services and improved living conditions as the urban residents.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report proportion of people without sustainable access to safe drinking water and improved sanitation. The Project is also consistent with ADB’s strategic objectives in the PRC to make markets work more efficiently through infrastructure development and to promote environmental sustainability. By supporting and integrating sustainable development in urban and rural areas, the Project supports ADB’s long-term strategic framework, Strategy 2020 (2008-2020)16 and PRC Country Partnership Strategy (2008-2010);17 it promotes efficient infrastructure, strengthens environmental management, and supports inclusive growth and balanced development to help the Government build a xiaokang (moderately well-off) society. The Project will improve municipal service provision by supporting urban-rural integration and enhancing the investment potential of rural towns, while protecting the environment.

2.2 Analysis of Key Problems and Opportunities

2.2.1 Project Background

10 Chongqing is located in the southwestern part of the PRC, between the Qingzang (Qinghai-Tibet) highlands and the plains of the middle and lower River. It borders the provinces of Guizhou, , , Shanxi, and Sichuan and is a major hub for water, land, and air transport.18 Chongqing covers an area of 82,400 square kilometers (km2) and comprises 19 districts and 21 counties. Chongqing's registered population at the end of 2008 was 32.57 million people, 50% of which is rural. It is the largest (in size and population) of the four municipalities in the PRC; previously it was part of Sichuan province but became one of the four municipalities directly under the central government in March 1997. Because of its size, it has a wide territorial reach that covers a vast hinterland and large and very poor rural population. It serves as an important growth center for the inland provinces of the western region. Chongqing has a large and generally unproductive state-owned enterprise sector, which historically has been a center of "reform experiments." The State Council and the National Development and Reform Commission (NDRC) has selected Chongqing municipality for piloting comprehensive urban-rural reforms.

11 The "Go West” national development strategy (2000) and the "Building Harmonious Society" are aligned with the vision and objectives of Chongqing, which focus on balancing development between the urban and rural areas. These strategies have a significant impact on Chongqing’s development, providing a unique opportunity to speed up its social and economic development, and to implement the development strategy known as "the big city leading the big countryside.

12 Water shortage is a serious challenge in rural Chongqing, due primarily to poor water infrastructure and surface water contamination. In 2008, approximately 8.45 million rural residents of Chongqing did not have safe, sustainable drinking water supplies. Waterborne diseases are prevalent in rural communities, including typhoid, dysentery and hepatitis; women and children are most vulnerable. In accordance with a joint NDRC, Ministry of Water Resources, and Ministry of Health directive (2007), which stipulates the "Construction, Operations and Management of Safe Rural Drinking Water Supplies," the CMG through its district/county governments are implementing rural water supply projects throughout the municipality. The proposed water supply components of the Project fully support this directive, which is expected to benefit about 184,000 people by cumulatively providing about 72,500 cubic meters (m3) per day of water to 10 towns.

13 Chongqing has a total of 897 towns and 9,986 administrative villages, of which only 874 (97%) and 7,395 (74%) respectively are accessible by rural roads. Transport operations exist in 851 towns (95%) and 4,251 villages (57.5%). It is planned that by 2012, all towns

16 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008-2020. Manila. 17 ADB. 2008. Country Partnership Strategy (2008-2010): People’s Republic of China. Manila. 18 Chongqing is the economic powerhouse of the Southwest with transportation hub that provides waterway, highway and airborne channels to the west part of the PRC. Its establishment was accompanied by the upgrading of old industrial bases and large-scale investments in infrastructure.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report and villages will be provided all-weather access and transport services.19 The Passenger Transport Development Fund, established in 2008, subsidizes fuel and insurance costs in order to improve transport affordability in rural areas.

14 The recent earthquake in neighboring Sichuan province (May 2008) highlighted the urgent need to improve rural road access to peri-urban and rural areas, to facilitate immediate evacuation and to allow emergency service access. As a result, adaptation measures including seismic design standards, slope protection and erosion control measures have been incorporated in rural road sub-component designs. Adequate environmental protection and management measures are also incorporated in order to strengthen the long term environmental sustainability of roads and water supply sub- components. A number of roads and water supply sub-components will also support tourism development, particularly the in northeastern and southeastern areas, close to the Yangtze River.

15 The Project’s 21 road sub-components include 362 km (kilometer) of roads, which will directly benefit about 209,000 people in 31 towns. This includes 323 km (89%) of road upgrades, such as improving unsurfaced urban-rural road networks to enhance traffic movements and road safety. Integrated urban-rural road development will dramatically increase rural connectivity, stimulate economic growth and improve disaster management.

16 The Project approach recognizes the relatively advanced stage of design development of the Project’s road sub-components, which are expected to remain largely unchanged during project implementation. In selecting the road components, priority was given to providing poor communities with safe, all-weather access to major economic centers and/or major highway networks. In selecting the water supply components, priority was given to poorer villages which lack piped water supply entirely, or have contaminated supplies.

17 The screening and selection of the sub-components and the districts/counties followed a consultative, ‘step-by step’ process. At TA fact-finding (May 2008), CMG initially proposed a ‘long list’ of 14 districts/counties and 104 sub-components for the Project to consider. These were then assessed by the Chongqing project management office (CPMO) (May 2008 to January 2009) in accordance with the overall Chongqing urban-rural integration demonstration theme, which was subsequently confirmed by the State Council (February 2009). In close coordination with ADB, the CMG also assessed the financing capacity of the districts and counties, resulting in a shortlist of 10 districts and counties and 50 sub-components at TA inception (February 2009). Districts/counties benefiting from the PRC's recent economic stimulus package were then excluded from the Project scope (from March to June 2009). Finally, only those districts and counties which committed to comply with ADB requirements and can fully participate in the Project were selected for Project inclusion; eight poverty districts/counties with 21 roads and nine water supply sub- components. The sub-component selection criteria and screening process are in Supplementary Appendix A.

18 The Project is pioneering initiatives that targets water supply and roads development in low income towns and villages of Chongqing’s districts/counties. By comparison, a recent World Bank (WB) intervention provides investments in higher-income urbanized areas of Chongqing. Coordination has been maintained with the CPMO and WB to ensure that the Project’s multi-sectoral scope and geographical coverage complements but is distinct from that of the WB.

19 The Project supports the Government's urban-rural integrated development and poverty reduction policies by providing sustainable urban-rural infrastructure. It fully aligns with “The Urban and Rural Comprehensive Planning of Chongqing Municipality (2007–

19 "Facilitating Rural Passenger Transport Development." Chongqing Municipal Government Directive, November 2008.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 2020)”. Seven of the Project’s eight poverty districts/counties (Qianjiang, Youyang, Xiushan, Yunyang, Fengjie, Wushan, and Chengkou) are classified as national poverty counties, while the eighth, Fuling, is a municipal poverty district. The Qianjiang District and Youyang and Xiushan counties have considerable ethnic minority populations. In these counties, 12.5% of the total rural population, or about 560,000 rural people, have incomes below the official poverty line of CNY1,196 ($176).

2.2.2 Project Rationale

20 The Project strengthens urban–rural linkages, and provides a highly replicable demonstration model for small-scale urban-rural roads and water supply development in poverty districts and counties. In Chongqing’s poverty districts and counties, poor road conditions severely restrict all-weather access for local communities within and between towns, while the lack of safe and reliable water supplies threatens public health and inhibits economic growth in rural areas. The strategy of urban-rural integrated infrastructure development will adopt a mode of development and urban expansion which considers the availability and responsible management of the natural resources of Chongqing.

21 The Sichuan earthquake (2008) and development of the Dam provide valuable lessons that have been incorporated into the Project. Regarding potential seismic events, the Project’s design includes geologic and seismic analysis for all physical components, resulting in designs that accommodate seismic movements. Such mitigation is designed into cut and fill slopes, transmission and distribution pipelines, building foundations and structures, and road pavements. Geologic and geotechnical analysis will also assure that pipeline and road alignments follow routes of least seismic risk, an important factor as Project road components serve as crucial escape and emergency-response corridors in the event of earthquakes and other natural disasters.

22 Important lessons from the are: (i) infrastructure developments should not diminish water inflows into the Yangtze River system, (ii) pollution loadings of wastewater entering the Yangtze need to be managed through wastewater treatment, and (iii) surface erosion needs to be controlled. As a result, the Project includes an innovative watershed management program, which provides protection to upstream and downstream water sources through water quality monitoring, watershed management, and public awareness in watershed areas.

23 The Project serves as a valuable demonstration project to support basic urban-rural infrastructure development in Chongqing’s poverty districts and counties. This is achieved through: (i) enhancing the synergy of water supply and roads infrastructure; (ii) improving technical designs, such as integrating climate change adaptation measures of proper slope protection and erosion control for roads; (iii) enhancing the coordination and integration of infrastructure planning and management; and (iv) strengthening the administrative capacities of urban-rural roads and water institutions.

24 The Project’s capacity building initiatives will ensure the sustainable operations and viability of the new water supply systems, while facilitating operational and managerial improvements to existing water supply systems. Although their respective county finance bureaus support these systems, they have high water losses, high operating costs, and correspondingly high financial losses. Through organizational restructuring and the re- engineering of operations, existing water system services will improve. The Project also strengthens community-based environmental awareness through a water and sanitation public education campaign. This campaign has considerable local government replication potential through pilot peer-to-peer learning and the building of a network of trained women on hygiene and health awareness, tariffs and public consultations in two of the Project’s counties. This is proposed as a pilot demonstration activity (PDA) under the WFPF.20 For the

20 It will be conducted at two schools in Yunyang County and two schools in Youyang County, which have been prioritized for school sanitation improvements. This will scale up the health and sanitation program that has

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report road sub-components, improved technical designs will result in lowered pavement and network maintenance costs, enhancing the long-term sustainability of the road assets. The urban-rural development sector and road and water sub-sector analysis is in Appendix 2. Supplementary Appendix B presents the detailed sector and sub-sector analysis.

2.2.3 Policy Dialogue

25 The Project will build on and further ADB’s policy dialogue with CMG in several key areas: (i) support to rural town-based water supply companies; (ii) support to sustainable integrated water resources development, protection, and environmental management; (iii) strengthening rural road maintenance for sustainability; and (iv) enhancing governance and anticorruption mechanisms. Supplementary Appendix C provides more details of policy dialogue and the urban-rural policy strategy note.

26 Support to Rural Town-Based Water Supply Companies. As a demonstration feature, the Project will ensure that the Project’s town-based rural water supply systems will be operated in an efficient manner, as the majority of them are gravity-fed systems, with lower operation and maintenance (O&M) costs. Capacity building support will provide training on water treatment plant operations, maintenance and water quality monitoring. Further, the Project design includes the promotion of user connections to water supply services and the metering of water to improve tariff collection efficiency, water conservation, and lower the levels of water losses. Currently, in the majority of the districts and counties, the poor receive subsidies on water use through the Poverty Alleviation Office which reimburses all or a portion of the water fees. In relatively poor towns, poor households require assistance given the relatively high connection fee of CNY330 ($49) /household. To meet service coverage targets, the CMG and district and county governments will coordinate with the Poverty Alleviation Office to identify funding sources to assist poorer households to connect to water supply services.

27 Sustainable integrated water resources development, protection, and environmental management. Project capacity building will support integrated water resource development, protection and environmental management within districts and counties. It will enhance water quality protection through more effective monitoring and improved watershed management. County water resources bureau capabilities will be strengthened, particularly their water source protection programs, which will improve water abstraction point quality, and control point- and non-point sources of pollution. All districts and counties are committed to construct wastewater treatment facilities and collection networks between 2010 and 2014.21 Funding support from counties is already committed for the wastewater interventions, as well as the proposed introduction of wastewater fee charging.

28 Strengthening rural road maintenance for sustainability. The districts and counties undertake routine and periodic road maintenance according to administrative function and pavement type22 through their respective transport bureaus and town traffic stations. District and county governments will be supported on road asset management under the Project through: (i) O&M trainings and manuals developed during Project implementation; (ii) the sharing of best maintenance practices and experiences for local roads between participating districts and counties; (iii) developing mechanisms such as axle load monitoring, and community participation, including women, in localized road maintenance; and (iv) ensuring CMG and district/county commitment to fund road

been implemented by the Women's Federation in a town in Yunyang County. 21 Wastewater treatment plant capacities: 16,000 m3/day for Longtan town, 10,667 m3/day for Mawang town, 4,267 m3/day for Jiangkou town, 533 m3/day for Nixi town, 800 m3/day for Yanglu town; 2,667 m3/day for Caotang town, 427 m3/day for Hongtu town, 2,240 m3/day for Longjing town, and 1,067 m3/day for Gaoguan town. 22 Routine maintenance includes activities such as filling potholes, repairing edges and shoulders, cleaning culverts and vegetation control. Periodic maintenance primarily involves periodic cut/fill slope maintenance, road resurfacing, and replacing line markings and signage.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report maintenance plans.23 Community participation for road maintenance activities will prioritize local labor (including women), construction materials and services in order to generate sustainable employment in local communities.

29 Promotion of rural road safety, transport services, and climate adaptation measures in the design of local roads. During Project preparation, safety design considerations have been incorporated including: (i) better route selection, (ii) traffic markings and signages, (iii) pedestrian lanes, and (iv) safety education and better traffic safety management by participating districts/counties. Road designs also include bus stops, traffic signs, speed limitation signs, road markings, and protection barriers. The measures to address climate change adaptation include slope protection, erosion control measures and drainage features. The Project’s local road design improvements will be promoted and replicated by the districts and counties in future road construction and upgrading programs, and by CMG within other districts and counties.

2.2.4 Development Coordination

30 Since 1992, ADB has provided 32 loans to the PRC, totaling more than $3.8 billion, for environmental improvement and infrastructure projects. It has also provided $56 million for more than 80 technical assistance (TA) studies to prepare these projects, and to review key issues in environmental improvement and infrastructure.24 Chongqing has borrowed $780 million from the WB in various sectors, and $270 million from ADB in the transport sector since 1997. Appendix 3 provides details of development coordination. The Government closely coordinates external assistance, and ADB missions meet frequently with WB and other development partners to share sectoral information and experiences. CMG and ADB previously requested the UN Habitat for possible grant financing for health and hygiene education programs to support the Project, however this was not possible due to funding shortfalls. Gender Action Development (GAD) funding was also sought, but this is also not possible as fund replenishment was not provided by donors for 2009-2010. A WFPF PDA grant of $50,000 was sought to support the Project on community hygiene and health awareness.

2.2.5 Lessons Learned

31 Lessons learned from ADB’s urban-rural development experiences include: (i) strategic master plans are instrumental in providing a comprehensive framework for infrastructure development and environmental management; (ii) public awareness, understanding and stakeholder consensus are crucial inputs in urban-rural infrastructure development; (iii) extensive public consultation and training on environmental health and protection are essential; and (iv) internal and external monitoring mechanisms must be provided for resettlement implementation, to ensure the effective coordination and timely implementation of land use approvals, compensation payments, and rehabilitation measures.

32 Lessons learned from ADB’s and WB’s experiences in urban transport projects highlight the importance of: (i) a comprehensive and participatory approach to project preparation; (ii) adequate consultation with affected parties in the formulation of planned and well-coordinated resettlement schemes; (iii) complementing physical investments with initiatives such as public transport, traffic management, road safety and road maintenance; and (iv) the inclusive participation and coordination of all involved agencies, and clearly defining their responsibilities.

33 Experience in the PRC water supply sector indicates that projects are well planned and implemented, and water tariffs are increased as required. Willingness-to-pay analysis indicates that consumers are willing to pay substantially higher prices for water. Issues

23 CMG, through the CPMO, has confirmed that sufficient maintenance budgets and resources will be provided to fully maintain all roads constructed under the Project. 24 Data sources: ADB Country Portfolio Midterm Review (2009).

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report related to tariff levels, cost recovery, and the commercial orientation of water utilities have been carefully addressed during project preparation. Lessons learned from previous projects have been reflected in the project design including: (i) greater focus on institutional strengthening measures to improve corporate governance, (ii) improved municipal and county coordination, and (iii) financial and institutional arrangements for more effective O&M.

34 A recent report25 notes that the keys to success on Chongqing’s use of foreign loans include: (i) effective planning, preparation, and management; (ii) appropriate selection based on a project’s objectives; (iii) standardizing operations to ensure openness and fairness; (iv) adequate supervision of project implementation and loan repayments; (v) adequate assessment of foreign currency risks; and (vi) monitoring of counterpart funds, land, and environmental protection issues.

35 Lessons learned from WB projects in Chongqing,26 applicable to this Project include: (i) component and sub-component selection criteria to include (a) the local government’s ability to arrange counterpart finance, (b) to undertake geotechnical investigations prior to detailed design to avoid changes during construction, (c) the importance of approved local development master plans, and (d) consistency with ADB’s development strategies and basic policies; (ii) the need for effective PMO coordination with all relevant municipal and district/county departments, and for adequate staffing of municipal and district/county level PMOs; (iii) the need to establish a website as a communication platform for relevant government departments during the Project preparatory and implementation stages; (iv) the need for a careful formulation of capacity building support initiatives, and clear roles for project implementation consultants; and (v) universal commitment to water source protection and wastewater treatment for every water supply component.

36 Lessons learned from IED studies 27 include: (i) devolving responsibility for road maintenance to local communities, particularly for basic rural roads, is a means of ensuring that the poor can potentially receive benefits through direct employment and that local communities are stakeholders in roads serving their area; (ii) if poverty reduction is to be a serious consideration, then the criteria for road selection should include a poverty component; (iii) roads can directly benefit the poor by providing employment in labor-based road construction and maintenance; (iv) governments’ institutional understanding of, and commitment to, poverty reduction must be equal to that of ADB's, and shared objectives should be agreed toward the common end of poverty reduction and addressing related structural barriers; (v) detailed preparation in the context of an integrated program is needed in order to make the design more effective and sustainable; and (vi) a proper analysis at the project design stage is necessary to determine the poor and on what would their livelihood strategies depend upon. These issues have been reviewed during project processing and the relevant lessons incorporated in the project design.

25 Report titled “Summary and study of issues on Chongqing’s use of foreign loans in 25 years” dated 6 August 2008. 26 WB’s Chongqing Urban-Rural Integration Project is targeted for approval in April 2010. It is multi-sectoral in scope with water supply, roads, health and education. The proposed loan is $84 million for 16 counties. A separate PMO was established for the WB project within Chongqing DRC. 27 ADB 2002. Impact of Rural Roads on Poverty Reduction: A Case Study-Based Analysis. Manila.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

3 THE PROPOSED PROJECT

3.1 Impact and Outcome

37 The impact of the Project is improved urban and rural environment and improved public health and quality of life for residents in the eight poverty districts/counties of Chongqing. The outcome of the Project is improved water supply and roads infrastructure and municipal services in eight poverty districts/counties in Chongqing Municipality. The project DMF was developed in close collaboration with the eight poverty districts/counties.

3.2 Outputs

38 The Project outputs are: (i) improved road accessibility and conditions in the eight poverty districts/counties; (ii) enhanced water supply services in five poverty counties; and (iii) increased capacity building of the executing agency (EA), the implementing agencies (IAs), and the implementing units (IUs). The Project will have 21 road sub-components and nine water supply sub-components. The detailed description of the sub-components is in Appendix 4 and Supplementary Appendix D. The technical analysis of the sub-components is in Supplementary Appendix E.

39 The Project includes institutional capacity building measures to ensure effective and smooth implementation and sustainable O&M of Project facilities. The capacity building component includes consulting services on project management and other training for the EA, CPMO, PMOs, district and county agencies, and IAs during loan implementation. The Project implementation consultants shall assist the EA to manage the Project, which covers a wide range of sub-components, and provide targeted assistance to the other agencies.

3.3 Demonstration Features

40 Tariff Reforms for Rural Based Water Supply. The Project will support tariff reforms requiring collection of wastewater fees as part of the user charges in Year 4 of project implementation to ensure implementation of wastewater collection and treatment plants in the districts/counties. Tariff policy setting is defined for urban and rural water towns' systems and required tariff increases subject to public consultations are allowed to ensure partial or full cost recovery. Affordability has been assessed and water and wastewater tariffs are up to 3% of the monthly income of the average and poor households in the project districts/counties. The Project will provide tariff adjustment and monitoring mechanisms for ensuring gradual tariff increases for rural water supply systems (mainly gravity-fed) to support cost recovery of O&M, debt service, and periodic replacement of equipment and funds for emergency repairs.

41 Strengthening of Water Sector Enterprises. The Project will support institutional strengthening of water enterprises and integration of urban-rural water supply under the capacity building component, to include water loss reduction measures, leakage control, improved meter testing, metering, improved water treatment and water quality monitoring, and skills upgrading of operations staff. This will ensure better operational performance, reduce operating losses, and improve the viability of rural water systems. Study of urban and rural towns has been undertaken, identifying the current weaknesses of these systems which include: overstaffing, high water losses, and high operating costs. Potential areas for strengthening of water enterprises are improving the current operations and capacity and potential private sector participation in the form of management contracts for urban systems. These can be patterned after the project town's rural water supply schemes particularly the least cost gravity-fed systems that can be operated efficiently with tariffs sufficient to cover O&M, debt service, and periodic repairs.

42 Web-Based Project Management and Coordination Mechanism. CPMO has initiated a web-based project coordination, monitoring and feedback mechanism, and project

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report database to facilitate information sharing among the EA, IAs, IUs, and ADB during project processing. The web-based Project coordination mechanism will be continuously improved throughout Project implementation until project completion. It was introduced to improve information exchange and networking among dispersed districts/counties, and ensure that database and documentation are complete throughout the project cycle, from processing until project completion.

43 Support to Watershed Management and Water Quality Monitoring. Watershed management and water quality monitoring support are important capacity building initiatives to strengthen environmental awareness and protection in the sub-component’s watersheds. It will reduce pollution threats from upstream communities and non-point sources through appropriate mitigation. There is an ongoing initiative of CMG, to ensure better environmental management through public support, ‘Hotline 12369’ which was piloted in Fuling district. It has already yielded benefits of ensuring strict compliance to pollution control regulations by local enterprises and industries and ensuring watershed protection by local communities.

44 Urban-Rural Road Management, Safety, and Maintenance System. Under the Project, the new roads and upgrading works has been designated in an integrated manner with the roads sector capacity building component and incorporate the following; road traffic safety, pedestrian safety, public transport services improvements/measures, maintenance systems improvement, tunnel management, and axle load inspection mechanism.

45 Improved Road and Water Supply Design and Environmental Management with ‘Built-In’ Climate Change Adaptation Measures. The Project’s road and water supply components and associated facilities such as drainage, erosion control, and slope protection will serve as climate change adaptation as well as disaster mitigation measures. Watershed management policies and activities will support increases in vegetated areas to prevent the pollution of water sources. Road connectivity between villages and towns will be valuable in providing alternative routes for all-weather vehicles and people when coping with an increased incidence of natural disasters and extreme events/natural hazards. The selection of water intakes has taken into account climate change. As part of project design and assessment, the Project will strengthen community approaches to watershed management and wastewater collection and treatment in small rural towns.

46 Community Support for Comprehensive Environmental Awareness and Sanitation Education. The Women’s Federation in Yunyang County has implemented a series of health and hygiene education awareness, tariffs and public consultations and training programs to women in pilot towns. The training focused on environmental protection, safe drinking water, and prevention of illness and disease that particularly affects women and children. A grant in the amount of $50,000 from RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program for a PDA has been proposed to support and extend health and hygiene programs to women and children in four villages in Yunyang and Youyang counties that include four schools with 2,300 students. It will strengthen community- based environmental awareness and sanitation public education campaign which can be up- scaled in future local government program through pilot peer-to-peer learning building a network of trained women on hygiene and health awareness, tariffs, and public consultations in Youyang and Yunyang counties. The proposal for the Water Fund pilot demonstration activity is in Supplementary Appendix F.

3.4 Project Investment Plan

47 The project investment cost is estimated at $213.9 million, including taxes and duties of $5.2 million. The total cost includes physical and price contingencies, interest and other charges during implementation. The tentative project investment plan is shown in Table 1 below.

Table 1: Tentative Project Investment Plan ($ million)

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Total Items Foreign Local a

A. Base Costs b 1. Land Acquisition and Resettlement 0.0 20.6 20.6 2. Survey, Design, Supervision 0.0 13.9 13.9 3. Civil Works 46.5 96.9 143.4 4. Equipment 0.4 3.9 4.3 5. Project Management and Capacity Building, and Pilot Demonstration 2.1 0.8 2.9 Activity Subtotal (A) 49.0 136.1 185.1 B. Contingencies c 5.6 18.1 23.7 C. Financing Charges d 5.1 0.0 5.1 D. Total (A+B+C) 59.7 154.2 213.9 a Includes taxes and duties of $5.2 million. b In November 2009 prices. c Physical contingencies computed at 10%. Price contingencies computed by year and expenditure based on cumulative domestic and foreign price inflation. d Includes interest and commitment charges. Note: Interest during construction has been computed at the 5-year forward London interbank offered rate on 12 November 2009, plus a spread of 0.20% and a commitment fee of 0.15% on undrawn balance.

3.5 Financing Plan

48 The Government of the PRC has requested a loan of $100 million from ADB’s ordinary capital resources to finance 46.8% of the project cost under ADB’s London interbank offered rate (LIBOR)-based lending facility. The loan will have a 25-year term including a grace period of 5 years, an interest rate determined in accordance with ADB’s LIBOR-based lending facility, a commitment charge of 0.15% per annum, and such other terms and conditions set forth in the draft loan and project agreements. The loan will cover civil works, equipment, project management consulting services, and capacity building. The loan will also finance taxes and duties. CMG will then onlend the loan proceeds to implementing agencies, which are the eight districts and counties, on the same terms and conditions as those of ADB loan. The IAs will assume the foreign exchange and interest rate variation risks for the ADB loan. The Government will finance financial charges during construction and contingencies. The tentative financing plan is in Table 2 below.

Table 2: Tentative Financing Plan ($ million) Source Total Foreign Local % Asian Development Bank a 100.00 48.95 51.05 46.8 RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program 0.05 0.05 0.00 0.0 District and County Governments 113.81 10.60 103.21 53.2 Total 213.86 59.60 154.26 100.0 a Interest during construction has been computed at the 5-year forward London interbank offered rate on 12 November 2009, plus a spread of 0.20% and a commitment fee of 0.15% on undrawn balance.

49 The summary cost estimates and financing plan are in Appendix 5 and the detailed cost estimates and financing plan are in Supplementary Appendix G. A grant of $50,000 for PDA will be financed under RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program. The relending and onlending arrangements and indicative flow of funds are in Appendix 6.

50 In addition to the $100 million loan requested from ADB, CMG confirmed that the district or county governments will distribute counterpart funding for the Project for Project activities in their respective district or county. To give assurance of availability of counterpart funds, the district and county governments have provided commitment letters to ADB through CPMO.

3.6 Implementation Arrangements

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 3.6.1 Project Management

51 Project implementation involves numerous municipal, district/county, and town/township government agencies, and state-owned enterprises (SOEs) as implementing units. CMG shall be the executing agency (EA) for the Project. The Project Leading Group (PLG) established by CMG, chaired by a Vice-Mayor and consisting of the CMG Deputy Secretary-General and members from CMG’s Development and Reform Commission (DRC), Finance Bureau, Poverty Alleviation Office, Transport Commission, Water Resource Bureau, Audit Bureau, Environmental Protection Bureau (EPB), Land Resources Bureau, Resettlement Bureau, and Construction Bureau, shall provide overall policy guidance, facilitate inter-agency coordination, and resolve any institutional problems affecting project implementation.

52 CMG has already established a CPMO to: (i) manage and coordinate overall Project implementation; (ii) liaise with ADB, the Ministry of Finance, the NDRC, and the municipal- level government agencies on matters related to the Project; (iii) engage and supervise (a) the Project Implementation Consultants and external monitors on the implementation of the environmental and social safeguards, (b) individual consultants to support short-term CPMO activities, and (c) the engineering/technical design institutes; and (iv) serve as the secretariat of the PLG. CMG has appointed the Chief Economist of the DRC as the CPMO director with the Chief and Deputy Chief of DRC’s Foreign Capital Utilization Department as the vice- directors of the CPMO. Several staff will assist them. The director of the CPMO will report to the chair of the PLG.

53 The eight poverty districts/counties will be the IAs for the Project and assume day-to- day responsibilities of the implementation of the roads and water supply sub-components in their respective district/county. Each poverty district/county has established a PLG and PMO. The PLG at the district/county level will provide policy guidance on the implementation of the sub-components at their respective district/county. The PMOs will: (i) manage and coordinate the implementation of the entire sub-components in their district/county; (ii) ensure the provision of the counterpart funding; (iii) engage the environmental and social safeguards design institutes; (iv) consolidate and submit to ADB the semi-annual progress reports and other reporting requirements; and (v) serve as the secretariat of the district/county PLG. The director of each district/county PMO is either a director or vice- director of the district/county DRC, or the director of the county coordination office. Representatives from various district/county agencies will support the director. The director of the district/county PMO reports to (i) the chair of the district/county PLG on policy matters; and (ii) the director of CPMO on Project implementation matters.

54 The IAs have assigned relevant agencies or SOEs to be the IUs and responsible for the implementation of the specific sub-components. Each agency or enterprise has established a Project management team to: (i) manage and coordinate the implementation of the assigned sub-component; (ii) engage (a) the tendering agency/ies, (b) the construction contractors, and (c) the construction supervisory agencies; and (iii) prepare progress reports and other reporting requirements related to their sub-component. The head of the Project management team reports to the director of the district/county PMO. The implementation arrangement is in Table 3 below. The detailed institutional arrangements are presented in Supplementary Appendix H and the project organization is in Appendix 7.

Table 3: Implementation Arrangement Implementing Sub-component Implementing Unit Agency 2 road sub-components Fuling District Fuling District Zhonglong Transport Construction Co Ltd 1 road sub-component Qianjiang District Qianjiang District City Construction Investment (Group) Co Ltd 3 road sub-components Youyang County Youyang Longda Road Construction Investment Co Ltd

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Implementing Sub-component Implementing Unit Agency 2 water supply sub- Youyang County (Youyang) Xinyou Water Supply Co Ltd components 1 road sub-component Xiushan County Xiushan Huaxin State Assets Co Ltd 4 road sub-components Yunyang County Yunyang County Transport Co Ltd 3 water supply sub- Yunyang County Yunyang County Jinyu Water Resources and components Electricity Co Ltd 4 road sub-components Fengjie County Fengjie County Roads and Bridges Co 2 water supply sub- Fengjie County Fengjie County Xinquan Water Supply Co Ltd components 5 road sub-components Wushan County Wushan County Transport Development Co 1 road sub-component Wushan County Wushan County Longsheng Construction and Development Co Ltd 1 road sub-component Chengkou County Chengkou County Road Bureau 1 water supply sub-component Chengkou County Chengkou County Water Supply Co

3.6.2 Implementation Period

55 The Project will be implemented over a period of 5 years from June 2010 to June 2015 (Appendix 8). This schedule is realistic and feasible because (i) project implementation arrangements are already in place and preparatory works are under way, (ii) CMG has proven knowledge and experience with similar financed projects, and (iii) ADB has successful experience in undertaking water supply and roads projects in the PRC.

3.6.3 Procurement

56 All procurement to be financed under the loan will be carried out in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Contract packages for the sub-components have been formulated in consultation with the Government, and procurement capacity assessments of the EA, IAs, and IUs have been undertaken. The general findings at each level (EA, IAs, and IUs) and the recommendation to address any gaps/weakness identified in the PCA (Supplementary Appendix I). Civil works contracts valued over $10 million and contracts for goods and related services above $1.0 million shall follow ADB procedures for international competitive bidding (ICB). Civil works contracts valued at $10 million or less and contracts for goods and related services at $1.0 million or less will be procured following national competitive bidding (NCB) procedures acceptable to ADB;28 packages for goods and related services valued at $100,000 and less and civil works valued at $200,000 and less will be procured through shopping procedures. The selection and engagement of contractors and suppliers will be subject to ADB approval. Before the start of any procurement ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB’s Procurement Guidelines. Appendix 9 presents indicative contract packages and a procurement plan for the sub-components to be financed by ADB, and the detailed procurement plan is in Supplementary Appendix J. Based on the assessment, it is recommended that prior review be applied for all ICB contracts, the first NCB contract for civil works, and the first NCB contract for goods for each IA, and post review for other procurement modes.

3.6.4 Consulting Services

57 The Project includes provision for funding 22 person-months of international and 200 person-months of national consulting services to support the CPMO, the district/county PMOs, and the Project management teams in project implementation and management and institutional capacity building. The consulting package is to be provided through a consultancy firm which will be selected using quality- and cost-based selection (QCBS) in accordance with Guidelines on the Use of Consultants by Asian Development Bank and its

28 ADB will require the EA to use ADB-approved standard bidding documents (to be developed as necessary) to ensure high quality and consistency of the documents; this will facilitate ADB review.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Borrowers (2007, as amended from time to time). A fixed quality-cost ratio of 80:20 will be applied for QCBS. The capacity building for the PMOs and the Project management teams will be achieved through consultant inputs, training courses provided by specialized institutes and firms, in-country and/or overseas study visits, and acquisition of equipment financed from the loan. To facilitate project start-up activities on technical design review and tendering, another consulting package comprising two individual project management and procurement specialists will be engaged through individual consultant selection (ICS) for a total of 12 person-months to assist the PMOs and the Project management teams in expediting Project implementation through: (i) comprehensive training to the Project management teams; (ii) technical design review; (iii) verification of bills of quantities; and (iv) assistance with recruitment of project consulting services. The scope and extent of consulting services will cover (i) project management and construction supervision, (ii) set up of management information system and project performance management system (PPMS), (iii) environmental management, (iv) resettlement, (v) social development, (vi) financial management, (vii) organizational restructuring and strengthening of human resources practices and corporate planning, (viii) O&M of the project assets, (ix) institutional strengthening through human resources development and training, and (x) strengthening good governance, accountability, and transparency. The consultants will also assist CPMO in activities related to ADB procedures and reporting, procurement, quality control, start-up testing, commissioning, O&M, and implementation of the PPMS. The CPMO will initiate advance action for the recruitment of consultants, including the short-listing of qualified consultants.

3.6.5 Advance Procurement Actions and Retroactive Financing

58 To expedite project implementation, the Government requested ADB to approve advance contracting, which includes the recruitment of consultants and procurement of goods and civil works; and the request for retroactive financing of eligible expenditures for civil works and equipment related to the sub-components in Youyang and Qianjiang of up to $20 million (20% of the ADB loan) to be incurred prior to loan effectiveness but not more than a maximum of 12 months before the signing of the Loan Agreement. 29 Advance contracting will include (i) prequalification of contractors, tendering, and bid evaluation for civil works contract packages; (ii) preparation of tender documents for the procurement of materials and equipment; (iii) award of contracts; and (iv) recruitment of consultants. The issuance of invitations to bid under advance procurement action will be subject to ADB approval. The Government was informed that as a general rule retroactive financing is permitted only if (i) ADB and the Borrower specifically agree it; (ii) the goods, works, services, and consultants for which it is requested are procured in accordance with ADB’s Procurement Guidelines (February 2007, as amended from time to time) (ADB’s Procurement Guidelines) 30 and ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time) (ADB’s Guidelines on the Use of Consultants).31; (iii) the amount to be retroactively financed does not exceed 20% of the loan amount, and (iv) the expenditures must have been incurred before effectiveness of the relevant loan but, generally, no earlier than 12 months before signing of the Loan Agreement. In either instance, detailed assessments (due diligence) on each retroactive financing proposal must demonstrate that (a) the expenditures incurred are genuine, reasonable, and material to getting the Project off the ground; and (b) they were incurred for proper reasons, in a transparent manner over a reasonable period of time. The borrower, Chongqing Municipal Government and PIUs have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project.

3.6.6 Governance and Anticorruption Policy

29 The advance action for the procurement and recruitment of consultants, and the uploading of the general procurement notice on the ADB website, will facilitate the start of the advance action process. 30 Available at: http://www.adb.org/Documents/Guidelines/Procurement/Guidelines-Procurement.pdf 31 Available at: http://www.adb.org/Documents/Guidelines/Consulting/Guidelines-Consultants.pdf

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 59 ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the EA, PMOs, and IAs. Consistent with its commitment to good governance, accountability and transparency, ADB reserves the right to investigate any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To address the risks on governance and corruption related to procurement of civil works, relevant provisions of ADB’s Anticorruption Policy are included in the loan regulations and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the EA and all contractors, suppliers, consultants, and other service providers as they relate to the Project. CMG has indicated its commitment to promote good governance and establish a corruption-free environment under the Project. Further to this, a number of good governance and anticorruption provisions have been included in the Loan and Project Agreements. These include the requirements for CMG to: (i) involve the agencies responsible for oversight of each IA in bidding and construction to enhance construction quality control and supervise effective work such as the Construction Bureau and Roads/Communications Bureau; (ii) introduce a dual-signing system in which the civil works contract winner also signs an anticorruption agreement with the employer;32 (iii) periodically inspect the contractors’ activities related to fund withdrawals and settlements; (iv) engage the Project management consultant to support the CPMO, district/county PMOs, and the Project management teams to ensure good governance, accountability, and transparency in project operations; and (v) in consultation with relevant central government ministries, update rules and regulations on local and corporate governance and anticorruption and enhance transparency of the operations of the IAs and the IUs.

3.6.7 Disbursement Arrangements

60 The loan proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). To facilitate project implementation and funds flow, an imprest account will be set up upon loan effectiveness and will be exclusively used to finance ADB’s share of eligible expenditures for civil works, equipment, and project management and capacity building. The initial advance to be deposited to an imprest account will not exceed either 6 months of estimated expenditures, or 10% of the loan amount, whichever is lower, to be financed from the imprest account. The direct payment procedures will apply for the large civil works contracts. If the Government initially funds eligible expenditures from its own resources, the reimbursement procedures will be used. To expedite funds flow and simplify documentation process, the statement of expenditures procedure will be used for liquidation and replenishment of imprest account and reimbursement of eligible expenditures not exceeding $200,000 per individual payment. Payments in excess of the statement of expenditures procedure ceiling will be reimbursed, liquidated, or replenished based on full supporting documentation process.33 The imprest account will be opened and managed by Chongqing Finance Bureau on behalf of CMG at a commercial bank acceptable to ADB. The bank charges on the imprest account will be financed from the loan resources.

3.6.8 Accounting, Auditing and Reporting

61 The CPMO will coordinate with the district and county PMOs and the Project management team at the IUs to prepare quarterly progress reports indicating progress made, problems encountered during the period under review, steps taken or proposed to remedy the problems, proposed program of activities, and progress expected in the coming 3 months. The EA and the IAs will keep records to allow the identification of goods and services financed from the loan proceeds, following accounting principles and practices prescribed by the Accounting Law of the PRC. This law requires that the financial statements shall generally follow recognized accounting standards. The EA and the IAs will set up and

32 Employer will be the implementing agency or district/county-level. 33 In line with adequate financial capability of the Executing Agency or IA based on the financial management assessment, the ceiling of the statement of expenditures is identified at a higher level to facilitate disbursement.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report maintain separate project accounts and records. The Project accounts and annual corporate financial statements of the EA and the IAs will be subject to an annual external audit (and subsequent translation) by auditors acceptable to ADB. External audits will be carried out in accordance with the State Council-approved regulations for auditing, and will have to meet ADB requirements. The audits will be carried out in accordance with the PRC audit regulations and must meet ADB requirements. A separate auditor’s opinion on the use of the imprest account and statement of expenditure will be part of the audit reports. The EA and the IAs’ annual audited financial statements and audited project accounts will be submitted to ADB no later than 6 months after the end of the fiscal year throughout the implementation period. The CPMO will submit reports and information to ADB concerning the use of the loan proceeds, project implementation, and the performance of the IAs. These reports will include (i) quarterly progress reports on project implementation, (ii) annual reports, and (iii) a project completion report not later than 3 months after the completion of the project facilities.

3.6.9 Project Performance Monitoring and Evaluation

62 The PPMS indicators, their relevance, and monitoring practicalities will be discussed with the PMOs, IAs and other project beneficiaries during project implementation. Disaggregated baseline data for output and outcome indicators gathered during project processing will be updated and reported quarterly through the {executing agency's} quarterly progress reports and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system.34 At the start of implementation of the Project, the CPMO and district/county PMOs and the Project management teams, with the assistance of the Project implementation consultant, will develop comprehensive PPMS procedures to generate data systematically on the inputs and outputs of the components, as well as the indicators to be used to measure the Project impact taking into account the sub-components’ scope. The CPMO will (i) refine the PPMS; (ii) confirm achievable targets; (iii) finalize monitoring, recording and reporting arrangements; and (iv) establish systems and procedures, no later than 6 months after loan effectiveness. CPMO will be responsible for monitoring and reporting on the performance of the Project. The basis for performance monitoring will be the DMF. The DMF identifies performance targets for the impact, outcomes, and outputs of the Project. By collection of data from the sources identified in the DMF, the CPMO will be able to report on an annual basis the performance of the Project. Specific reporting requirements will be set out in the agreement between the ADB and the Government. The CPMO will collect the data, calculate the indicators, analyze the results, and prepare a brief report describing the extent to which the Project is generating the intended outputs and outcomes in the districts/counties, as well as the overall impact on the development sector in Chongqing.

63 The EA, through the CPMO, has agreed on the following reporting commitments: (i) submission of quarterly progress reports during project implementation; (ii) submission of semi-annual reports on the progress of safeguards monitoring, i.e. resettlement activities, environment plan implementation, social safeguards implementation; (iii) submission of project completion report 3 months after completion of the Project; and (iv) submission of audited financial statements 6 months after the end of fiscal year. PPMS data will be incorporated in the quarterly progress reports.

3.6.10 Project Review

64 ADB, the Government, and CMG will undertake a semi-annual review mission to evaluate the progress of Project implementation. ADB, the Government, and CMG will undertake a comprehensive midterm review 2 years after the start of project implementation to have a detailed evaluation of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity-building measures. Feedback from the PPMS activities will be analyzed.

34 ADB's project performance reporting system is available at: http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

4 TECHNICAL ANALYSIS OF ENGINEERING FEASIBILITY STUDIES

4.1 Introduction

The development objective of the Project is to provide urban and rural infrastructure development demonstration for integrated urban-rural development of the poverty district and counties that are appropriate for replication across Chongqing Municipality and elsewhere in the PRC.

At present the infrastructure facilities in the subproject areas are rather poor. Residents in the towns and townships have suffered from non-existent or poor roads and non-existent or inadequate water supply and poor sanitary and living conditions. Major road related problems include insufficient roads, low proportion of paved roads, and poor quality. Major water supply related problems include inadequate supply capacity, poor quality, and outdated networks. The road and water supply components will be beneficial to the convenience, health and wellbeing of residents, extend accessibility and coverage, and promote achievement of local development plans.

The Project focuses on infrastructure improvement for integrated urban-rural development, covering eight districts and counties and 38 townships and towns. The main sectors are roads and water supply. There are in total 30 components, 21 of which are for roads, and nine of which are for water supply.

It is noted that the scope of the components has evolved as a result of intervention of ADB officers and the TA Consultants from February to August 2009.

4.2 Component selection criteria

The proposed components selected for the Project are those that support approved development master plans and sector programs in districts and counties and towns and townships with urgent needs for urban or rural roads and water supply infrastructure development or improvement and environmental management, where the district or county governments have demonstrated willingness to subject the components to ADB safeguard policies and requirements, ability to arrange counterpart finance, strong interest and firm commitment, with an implementation period between 2010 and 2015. The components strongly support poverty reduction or pro-poor growth, employment generation, improvement of ecological environment, enhanced pollution control, and sustainable development, which are consistent with ADB’s medium and long-term development strategies in Asia and ADB’s PRC Country Partnership Strategy and PRC's development objectives in promoting balanced growth/harmonious development and environmental protection.

In the selection of proposed road sub-components, priority has been given to improving safe access of poor communities by providing them with all-weather roads linked to major economic centers and/or major highway networks.

In the selection of proposed water supply sub-components, priority has been given to villages facing water shortage and poor water quality, where the implementation of the components will enhance linkage of the urban and rural regions, provide vital support to accelerate sustainable urban and rural economic growth, and assist existing settlements to rise above poverty levels and promote the establishment of new settlements and agricultural and commercial enterprises.

All subproject districts and counties and/or towns and townships have approved development master plans and programs that the subprojects will directly support.

4.3 Identification of the Project’s sub-components

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report The proposed road sub-components will provide urban-rural connectivity and help to channel the development into productive areas by enabling: (i) easier and safer travel to economic and social facilities and services (markets, schools, health clinics, facilitation of information exchange, and non-farm based employment opportunities), and (ii) reduction in the cost of transporting farm inputs to rural communities, and farm products to markets. They will not only increase economic connectivity between towns/townships and villages, but also serve as escape routes in the case of natural disasters. Tourism is another justification for implementation of some of the road components in both the northeast and southeast wings.

The 21 road sub-components in eight components belong to four types with distinct functions including: (i) inter-urban roads; (ii) urban-rural roads; (iii) tourism sector roads; and (iv) mining resource roads. The total length is 362 km.

The Project includes nine water supply sub-components, covering nine towns/townships in five counties. The total design capacity is 72,500 m3/d with the smallest scale of 800 m3/d for Hongtu Township water supply in Fengjie County and the largest scale of 30,000 m3/d for Longtan Town water supply in Youyang County. Totally about 300,000 people in the water supply service areas will be served with safe piped water as a benefit of the Project. Each water supply component includes water capture structures, water treatment plant, water transmission and distribution pipelines, and related equipment, instrumentation, access roads and ancillary facilities. Wastewater treatment plans and recommended water sources protection measures have also been considered.

4.4 Inputs from ADB

The ADB inception mission, review mission and interim mission conducted extensive practical training and discussions with Chongqing PMO, subproject PMOs, the TA Consultants and the local design institutes (LDIs) in a number of meetings and workshops, and site visits to various subproject districts/counties, to determine the appropriate methodology and practical approaches for conducting technical due diligence (as well as other due diligence) for the road and water supply components. These ADB missions have provided detailed technical guidance to the TA Consultants and the LDIs to resolve the technical issues identified. The TA Consultants have followed up with the LDIs to address the issues and incorporate the findings in the technical analysis.

The technical analysis of the sub-components is in Supplementary Appendix E.

Roads

The road sector involves construction of rehabilitated and new roads, focusing on district or town bypasses, upgrading the existing unsurfaced (inadequate) roads, and their construction, enhancing the traffic capacity, linking the urban and rural traffic networks, acceleration of the growth of the urban and rural regions, and improving traffic planning and management.

The implementation of the road sub-components will upgrade the existing inadequate roads, enhance the traffic capacity and linkage of the urban and rural traffic networks, improve traffic planning and management, enhance linkage of the urban and rural regions, and provide vital support to accelerate sustainable urban and rural economic growth.

The key issues on the road sub-components covered by the report include transport master plan, traffic data, traffic composition, traffic growth forecasts, road design standards (road class, pavement, bridges, tunnels and culverts), road maintenance, and seismicity, study of potential geological hazards in relation to Three Gorges Reservoir construction, road safety, traffic management, and public transport

Layout of chapters in Supplementary Appendix E for the road sub-components in each component is as follows:

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Part 1 Road Sub-components: Summary of the project characteristics and purpose Part 2 Overview: Summary of the district or county’s traffic activity Part 3 Existing Conditions and Problems Part 4 Current Road Network Part 5 Master Plan: Relationship between the master plan and the road development. Component Justification: Description of the proposed project sub-components for Part 6 improving infrastructure conditions and helping integration of the regional planning of urban and rural development Demand and Forecasts: Description of traffic data and required survey; calculation of traffic Part 7 forecast Project components and Alternative comparisons: Review of technical project elements Part 8 comprising road class, road alignment and geometry, pavement structure and tunnels, bridges and culverts; project options are described and discussed, where relevant Part 9 Geotechnical Engineering Part 10 Project Costing: Review of construction and maintenance costs Part 11 Project Schedule: Review of planned period for construction Part 12 Road Safety, Traffic Management, and Public Transport

Water Supply

The water supply sector involves increases in the capacity to supply potable water and coverage of distribution networks.

The implementation of the water supply sub-components will increase the capacity and security of water supply, extend the coverage of water distribution networks, improve water supply planning and management, enhance linkage of the urban and rural regions, and provide vital support to accelerate sustainable urban and rural economic growth.

The key issues on the water supply sub-components covered by the report include the project scope and scale, collection, review and treatment, design stuff, water sources protection, wastewater treatment; water capture application; water balance analysis, and alternatives comparison.

Layout of chapters in Supplementary Appendix E for the water supply sub-components in each component is as follows:

Part 1 Overview: Summary of the component Part 2 Existing Conditions and Problems Part 3 Master Plan Part 4 Demand and Forecasts Part 5 Component Justification Extraction from Water Sources (Security of Water Supply, Effects on Downstream, and Part 6 Water Balance, Water Quality of the Water Source, and Water Source Protection) Part 7 Applicable Standards, Codes, Design, and Construction Guidelines Part 8 Proposed Works Part 9 Alternatives Comparisons and Least-cost Analysis Part 10 Schedule Part 11 Assurances

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 5 PROJECT BENEFITS, IMPACTS, ASSUMPTIONS AND RISKS

The Project will directly benefit about 377,000 people37 in Chongqing, of which about 47,000 or 12.4% are poor. All residents in the eight poverty districts/counties will benefit indirectly, as their living conditions will improve as a result of (i) improved water quality and quantity; (ii) reduced use of polluted water sources; (iii) reduced incidence of waterborne diseases and associated reduction in medical costs; and (iv) reduced pollution loads on air, water, and land due to improved roads and water treatment. Further, the Project will have a positive impact on the urban environment including the poor through improved water supply, and roads construction and rehabilitation. The Project will generate employment during the construction and operation phases of infrastructure works. Health benefits are expected to be felt disproportionately by women and children. The Project also indirectly supports ADB’s broader Clean Energy and Environment Program (2008) through enhancing water resources management, and improved road network facilities.

5.1 Poverty Reduction and Social Aspects

65 The Project will contribute to poverty reduction by ensuring that targeted poor communities have access to safe and reliable water supplies and upgraded and expanded road networks, which will incrementally improve living conditions and provide better and safer access to jobs and social services for existing residents and new migrants in the districts/counties. The Project’s water supply and roads improvement initiatives will stimulate investment in industry and the services sector. Between 70%-80% of the construction jobs are assumed to be unskilled jobs, many of which are likely to be filled by currently unemployed persons. Since unemployment is a primary cause of poverty in the Project area, the poor will benefit disproportionately from jobs created by the Project. In total, approximately CNY44.7 million ($6.57 million) in employment benefits will be generated in the poverty districts and counties of Chongqing. 30% of women, the poor and ethnic minorities during the construction phase will be given priority access to new employment opportunities. The Summary Poverty Reduction and Social Strategy is in Appendix 10, and the full poverty and social assessment and social action plan are in Supplementary Appendix L.

66 The poverty and social assessment (PSA) provides a profile of the Project area, and includes a social action plan (SAP) and gender action plan (GAP) that propose measures to mitigate adverse social impacts, actions, and initiatives that could increase beneficiary participation in project design and implementation. It will provide opportunities to link with other programs to enable them to benefit from the economic growth and social empowerment aspects of the Project. The Project will also contribute to reducing the incidence of waterborne and respiratory diseases. Investments in improved water supply in ten towns in the five counties are anticipated to result in a decrease of medical expenses related to waterborne diseases of about CNY6–CNY10 million ($0.88-$1.47 million) in Chongqing per year over the period 2014 to 2033. A health impact analysis is shown in Supplementary Appendix M. The PSA indicates that women strongly support and anticipate benefit from both the road and water supply sub-components. Gender has been mainstreamed into the design of the Project, including a range of gender-sensitive measures, requirements for consultation, training, and monitoring indicators. The IAs will work with Women’s Federations, contractors and communities to facilitate the participation of women in paid work opportunities for physical works; and ensure that all PRC labor laws and core labor standards are respected. A summary GAP is shown in Appendix 11.

67 No marked difference in income level or occupational group from the Han majority characterizes the ethnic minorities living in the sub-component areas (22% for road components and 33% for water supply components). The majority of beneficiaries in the three sub-component ethnic minority autonomous district and counties are the Tujia ethnic

37 Beneficiaries for roads and water supply are 184,000 and 209,000 people, respectively. Common beneficiaries are 16,000 people. In effect, there are 377,000 beneficiaries combined.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report minority. Although the Tujia are culturally assimilated and do not exhibit different socio- cultural characteristics from the Han, the Project will provide measures that will ensure their participation through adequate information dissemination. An Ethnic Minority Development Plan (EMDP) has been prepared. Livelihood restoration measures associated with resettlement will also be incorporated in the RP and project design. The EMDP is in Supplementary Appendix N.

5.2 Resettlement

68 The Project comprises 30 sub-components for road and water supply sectors. The construction of all the sub-components requires some land acquisition and resettlement. In total, the Project will acquire about 163.3 hectares (ha) of land, of which 80.2 ha is classified as cultivated land. The Project will also require the temporary occupation of 43.1 ha of land, of which one-third is farmland. A total of 37,149.6 square meters (m2) of residential houses will be demolished. Land acquisition will affect 4,238 households and 17,456 affected persons (APs). House demolition will adversely impact 341 households and 1,387 APs. In total 4,387 households and 18,004 APs will be affected in 8 districts/counties. Among them 192 households with 839 APs will lose both land and structures/houses.

69 The rural farmers suffering land loss will be offered land for land of equivalent size and quality or a cash option at replacement costs and various livelihood restoration measures. Compensation for standing crops, auxiliaries, and other assets will also be paid directly to the APs. Based on PRC regulations, about 1,539 APs will get an opportunity to become urban residents. People losing housing in rural areas will receive cash compensation at replacement costs or cash compensation for structure plus provision of house plots. The measures for economic rehabilitation include provision of employment opportunities during the project construction and operational phases, development of economic crops with higher economic value, promotion and development of new enterprises and self-employed secondary and tertiary businesses, provision of technical training to the APs to increase their skills and special support to vulnerable groups. The cost estimate for land acquisition and resettlement for the 30 sub-components is equivalent to CNY149.8 million or $21.9 million in 2009 prices, including contingencies. The Summary RP is in Appendix 12.

5.3 Financial Aspects

70 The summary financial analysis is in Appendix 13 and the detailed financial analysis in Supplementary Appendix O. The financial internal rates of return (FIRRs) and financial net present value (FNPV) were computed for water supply sub-components, which are revenue generating, at November 2009 price level. They range from 3.4% to 6.9%, which exceed the weighted average cost of capital at 3.3%. Water and wastewater tariffs account for about 1.7% to 2% of the average households’ income and 1.6% to 2.2% of the poor households’ income and are acceptable given the improved service compared with the current unreliable water supply situation. The districts/counties must be able to rationalize the need of improving fee collection vis-à-vis improved services.

71 There are no existing specific guidelines for level of cost recovery and tariffs for poverty districts/counties especially in rural areas. However, the gradual increase in tariffs will allow for: (i) cost-recovery of the O&M costs; (ii) debt service; and (iii) the establishment of a reserve fund to meet planned equipment replacement every 5 years. The demonstration effect highlights that sustainability and cost recovery are ensured for town-level water supply sub-components that are properly planned using the least cost option, gravity-fed, adequately funded, managed, and operated efficiently. This may be compared with county urban water supply systems that have high water losses as a result of high pumping costs and overstaffing. Capacity building, including development of O&M plans, water loss reduction programs and financial management improvements will be provided to improve the performance of existing urban water supply operations. Therefore, for the water supply sub- components, tariffs will be set initially at affordable levels to encourage the communities to

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report apply for connection, achieve recovery of O&M costs and allow funds for capital replacement and periodic repairs. Progressively, tariff levels will be reviewed to gradually introduce a proposed wastewater service charge on all customer classes. This is an advance over existing small town systems where no wastewater fee is levied. This recognizes the importance of preventing water pollution and the need to protect water sources, which will allow for proper planning and construction of wastewater collection and treatment facilities within these towns.

72 For the non-revenue generating roads components, the funding sources for counterpart funds, O&M costs, and debt service were reviewed. The conclusion is that the eight poverty district/counties can provide the counterpart funds required during project implementation in a timely manner. The O&M arrangements and plans are also in place. The counterpart funds will be provided as a government grant to increase services to the poor. The Project counterpart funds account for 0.8% to 4.7% of district any county finance bureaus’ revenue base. The roads funding and sustainability analysis is in Supplementary Appendix P.

73 Financial management assessments of the EA, eight IAs, and 13 IUs are in Supplementary Appendix Q. All the implementing agencies are district/county governments. Twelve of the IUs are state-owned enterprises, and one is a county government department. The financial management capacity of them was found to be adequate for the implementation of the Project although training in ADB procedures especially procurement, disbursement procedures, project management, and accounting systems will be required. None among the EA, IAs, and IUs have implemented an ADB project; a capacity development component to strengthen financial management systems and provide training is included in the Project.

5.4 Economic Aspects

74 The economic analysis was carried out for the 21 road sub-components and the nine water supply sub-components. The economic internal rate of return (EIRR) varies from 15.7% to 19.5% for the road sub-components and from 17.3% to 19.7% for the water supply sub-components, well above the economic opportunity cost of capital of 12%. Economic costs include: (i) capital costs, including land acquisition and resettlement, and environmental mitigation and monitoring costs; (ii) project management and institutional strengthening; (iii) physical contingencies; and (iv) O&M cost. Economic benefits for rural roads include: (i) savings in vehicle operating costs, (ii) time savings, (iii) accident avoidance costs, (iv) generated traffic benefits, and (v) income gains created by an all year-round road access. Water supply benefits include: (i) resource cost savings (user cost savings and user time savings), and (ii) beneficiaries’ willingness to pay for improved and expanded water services. Not readily quantifiable benefits, such as improved health and increased employment and climate adaptation benefits have not been included. A summary economic analysis is in Appendix 14 and the detailed economic analysis is in Supplementary Appendix R.

5.5 Environmental Aspects

75 The Project is classified as category A according to ADB’s Environmental Assessment Guidelines (2003). Certified EIA institutes have prepared environmental impact assessment (EIA) reports in compliance with relevant laws, regulations, and guidelines of the PRC and ADB policies and requirements and ADB's Environmental Assessment Guidelines (2003).

76 The Project has substantial environmental and socioeconomic benefits. Some adverse impacts on the environment during construction and operation stages are expected but adequate measures will be implemented through the environmental management plan (EMP) to mitigate the impacts. During construction, special attention will be accorded to the: (i) water quality of surface and ground water sources; (ii) avoidance of impacts on downstream water users; and (iii) adequate monitoring of road sub-components for their

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report intended purposes and sustainability.

77 The designs for road and water supply sub-components also address a range of climate change issues as: (i) they do not significantly contribute to greenhouse gas emissions nor increase the region’s vulnerability to climate change effects, and (ii) they promote a planning approach to integrating adaptation measures in roads and water supply infrastructure development at district or county level. Local environmental protection bureaus (EPBs) will support the IAs to undertake the EMP.

78 The capacity building in environmental management will be undertaken for the EA, IAs, IUs, and district and county EPBs. The implementing agencies have disclosed the relevant environment information to the affected people through rounds of consultations in 2008 and 2009 and results were used to modify EIAs and project design.

5.6 Project Risks and Mitigation Measures

79 The Project does not have any unusual technical risks. Conventional engineering designs with proven reliability and performance will be adopted for water supply and roads improvement. Mitigating measures will be put into place to address any risks identified during the detailed design of physical improvement works. During implementation, the Project implementation consultant will support the PMOs and the Project management teams to ensure that equipment and works comply with the design requirements and quality assurances.

80 The following risks could affect timely implementation and realization of Project outputs and benefits: (i) lack of strong Project coordination between CPMO, district/counties PMOs, and the Project management teams in the synchronization of Project activities and requirements, (ii) delays in implementing land acquisition and resettlement programs, (iii) delays in the provision of counterpart funding, particularly for road sub-components, (iv) lack of sustainable O&M for physical sub-components, and (v) difficulties in complying with ADB’s procurement procedures.

81 Risk (i) will be mitigated through, (a) continuation of CPMO’s web-based project management information system, (b) extensive coordination support from the Project implementation consultants, (c) close Project monitoring by CPMO, especially during initiation phases, and (d) frequent CPMO on-site inspections and regular coordination meetings. Risk (ii) will be mitigated by expeditious implementation of the detailed measurement surveys (DMS), early availability of AP compensation funding, and strict operational compliance with the RPs. Risk (iii) will be mitigated through covenanted assurances from the district/county governments for timely provision of counterpart funding and direct CPMO coordination with them. Risk (iv) will be mitigated through significant long- term capacity building to water supply and road maintenance O&M agencies. Risk (v) will be mitigated through early mobilization of the external procurement specialists to provide intensive initial training and ongoing technical support.

82 The eight component reports are in Supplementary Appendixes T1 to T8.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

6 ASSURANCES AND CONDITIONS

6.1 Assurances

83 In addition to standard assurances, the EA, the IAs, and the IUs provide the specific assurances summarized below, which will be incorporated in the Loan and Project Agreements. Appendix 15 provides the full list of assurances.

(i) CMG will cause the IAs to ensure that the roads to be constructed under the Project are consistent with the relevant development master plans of the respective districts and counties. (ii) CMG will cause the IAs to ensure that all works under the Project are designed and constructed in accordance with national standards and specifications, and that the construction supervision, quality control, contract management, and completion inspection and acceptance procedures follow all applicable national, provincial and local laws and municipal regulations. (iii) CMG will cause the IAs to (a) provide counterpart funding in a timely manner, including any additional counterpart funding required for any shortfall of funds or cost overruns; and (b) maintain adequate annual funding for the operation and maintenance of Project facilities, and that they will be operated and maintained in accordance with applicable engineering practices. (iv) CMG will cause the IAs to ensure that (a) water supply tariffs will be set progressively in order to achieve cost recovery; (b) annual review of tariffs and fees will be undertaken in accordance with specified tariff setting mechanisms; and (iii) the impact to the poor of water supply connection fees and tariffs will be assessed and, based upon the assessment, necessary subsidies will be provided to ensure water provision to the poor. (v) CMG will ensure that in the event of (a) any change in ownership or control of the Project facilities; or (b) any sale, transfer, or assignment of the shares of any of the IUs is anticipated, then CMG will consult with ADB at least 6 months prior to the implementation of such change. CMG and the IAs will further ensure that such changes are carried out in a lawful and transparent manner. (vi) CMG will cause the IAs to (a) implement the GAP including taking all reasonable and necessary steps to encourage women living in Project areas to participate in the planning and implementation of the Project, and (b) monitor the Project's impacts on women during Project implementation and report them in the PPMS. (vii) CMG will cause the IAs to (a) ensure that any land acquisition under the Project will be implemented in accordance with the RPs, all applicable PRC laws and regulations, and ADB’s Involuntary Resettlement Policy (1995); (b) update each RP based on final design, including detailed measurement surveys and as such, updated RPs will be submitted to ADB for its concurrence prior to award of any related civil works; (c) disclose each updated RP to AP in accordance with ADB’s applicable information disclosure requirements for resettlement; (d) provide compensation and other entitlements to all affected people in accordance with each approved RP, prior to commencement of construction activities; (e) assign adequate numbers of staff and resources to supervise, internally monitor, and evaluate the implementation of each RP; (f) provide CMG and ADB with a semiannual internal monitoring report during resettlement implementation and a resettlement completion report; (g) engage an independent monitoring agency acceptable to ADB to carry out monitoring and evaluation, including data disaggregated by gender where applicable, and forward reports to ADB semi-annually during resettlement implementation and annually for two years after completion of resettlement; and (h) promptly advise ADB of any changes

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report in the resettlement impacts and, if necessary, submit a revised RP to ADB for its approval. (viii) CMG will cause the IAs to implement the EMDP, whereby (a) benefits will target ethnic minorities in the Project areas in accordance with ADB's Policy on Indigenous Peoples; (b) contract for works will specify requirement to comply with SAP and EMDP and, as a priority, provide employment to ethnic minorities; and (c) adequate staff and resources will be dedicated to supervise and monitor the implementation of the EMDP and its progress, which will be reported to ADB on a semi-annual basis. CMG will also engage an independent monitoring agency acceptable to ADB to monitor the implementation of the EMDP on a semi-annual basis, and submit the monitoring report to ADB. The monitoring data shall be disaggregated by ethnicity (and gender and poor/non-poor), and each monitoring report shall include an analysis of social impacts by ethnicity and gender. (ix) CMG will cause each IA to construct, operate, maintain and monitor the Project facilities in strict conformity with (a) all applicable laws and regulations, including national and municipal regulations and standards on environmental protection, wastewater treatment, sediment and sludge disposal, health, labor, and occupational safety and ADB’s Environment Policy; and (b) all environmental mitigation and monitoring measures detailed in the EIAs, SEIA, and EMP for the Project under the guidance of the Chongqing Environmental Protection Bureau or other designated environmental monitoring centers. CMG will cause the IA to incorporate such mitigation and monitoring measures into the design and bidding documents and construction contracts. Throughout Project implementation, CMG, the IAs, and the IUs will review any changes to the Project design that may potentially cause negative environmental impacts, and in consultation with ADB, revise the EMP as necessary to assure full environmental compliance.

6.2 Condition for Disbursement

84 The condition for the disbursement of loan proceeds for the benefit of the Project activities in a particular district or county will be upon receipt of certification from the Government (i) that the EA and the relevant IA has duly executed and delivered the onlending agreement; and (ii) that such onlending agreement includes terms and conditions as are required in the Loan Agreement and has become effective and binding upon the parties thereto in accordance with its terms.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 1 DESIGN AND MONITORING FRAMEWORK Design Summary Performance Targets / Data Sources / Reporting Assumptions and Indicators Mechanisms Risks Impact Assumptions Improved urban-rural Increased urban-rural CMG Annual • 11 FYP and all environment and enhanced linkages and roads per Report/project progress district/county public health and quality of square kilometer in rural reports, CMG and county master plans are life for residents of affected areas by 2018 records and statistics effectively poverty districts/counties. implemented Increased public Annual sex-disaggregated • All applicable satisfaction with the socioeconomic surveys national, urban-rural environment undertaken as part of the municipal, and and provision of road project performance local transport and water monitoring system environmental supply services (quantity laws are and quality) Most significant change effectively (MSC) monitoring to enforced Increased paved-road identify differential impacts access from 60% to 75% and levels of satisfaction Risks within towns and from between women and men • Climate change 50% to 70% in villages by adversely affects 2018 District/county statistics; project Poverty Reduction Office implementation Improved water supply annual data through delays coverage in rural and potential communities by 2018 ADB review missions environmental hazards Improved road access of Water Resources Bureaus' • Weak poor communities to records on production, enforcement of markets and employment treatment, and distribution environmental opportunities by 2018 capacities of rural areas of laws and districts/counties regulations Production, treatment and • Costs are higher distribution of water Environment Protection than foreseen supply increased by 70% Bureaus' monitoring for Youyang, Yunyang, records of water quality in and Chengkou Counties; rural areas of and by 50% for Fengjie districts/counties and Wushan counties Health Bureau and Center Incidence of waterborne for Disease Control Data diseases reduced by 15% on drinking water quality by 2018 from 2009 levels and incidence of water- borne diseases. Sex dis- aggregated baseline data and follow-up surveys Outcome Assumptions Improved urban-rural roads Paved-road access for District/county • Infrastructure and water supply villages increased to 70% records/statistics assets are built infrastructure in the eight for Fuling District and and properly component Chengkou County, to 75% Sex dis-aggregated operated and districts/counties for Qianjiang District, to baseline data and follow- maintained 80% for Youyang County, up surveys • Political support to 90% for Xiushan and for institutional Yunyang counties, and to strengthening of 65% for Fengjie and water utility Wushan counties by 2016 management and financing Journey time shortened continues by 60% for Fuling District; • Customers are 50% for Qianjiang District, willing to pay Youyang, Yunyang, increased tariffs Wushan and Chengkou counties; and 20% for Risks Xiushan and Fengjie • Actual population counties by 2016 and/or traffic growth is less than the

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Design Summary Performance Targets / Data Sources / Reporting Assumptions and Indicators Mechanisms Risks Improved access to estimates markets, employment • Actual water opportunities and key demands are social services lower than the estimates Additional supply of Operating and financial 72,500 m3/d/day of reports of water supply treated potable water by companies in the 2016 component counties

Potable water supply coverage in rural communities increased by 60% for Youyang County, 40% for Yunyang County, 15% for Fengjie County, 20% for Wushan County, and 30% for Chengkou County by 2016

Incidence of waterborne Public health department diseases decreased by and environmental 20% for Youyang County, protection bureau statistics 10% for Yunyang County, and 15% for Chengkou County by 2016

Increased employment Contractors' employment opportunities with the data (to be dis-aggregated creation of about 20,000 by sex, income status, age jobs over the construction and ethnicity) phase and about 1,000 permanent jobs by 2016

At least 30% of skilled Contractors' employment and unskilled construction data jobs to be filled by the poor, women and ethnic minority people

Reduced time burden for women and children in water collection

Improved health and hygiene awareness for women Outputs Assumptions Road sub-components in Road sub-components in Regular IA reports on • Project financing Fuling and Qianjiang Fuling and Qianjiang contract expenditure and is provided on Districts; and Youyang, Districts, and Youyang, works progress time Xiushan, Yunyang, Fengjie, Xiushan, Yunyang, • Strong support Wushan and Chengkou Fengjie, Wushan, and Site inspection and from CMG and Counties Chengkou Counties monitoring reports on local 21 road sub-components 362 km of new and project implementation governments including new and upgraded roads opened progress by the • Effective upgraded urban-rural to traffic by2015 Chongqing PMO stakeholder roads opened to traffic participation and ADB review missions ownership Water supply sub- Water supply sub- development components in Youyang, components in Youyang, Construction supervision • Good project Yunyang, Fengjie, Wushan Yunyang, Fengjie, and monitoring reports coordination and and Chengkou Counties Wushan and Chengkou feedback 9 water supply sub- Counties by 2015 Project completion report mechanism in components including place new water treatment New water treatment • Timely approval plant, pipelines, and plants with 72,500 Monitoring reports on of land acquisition

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Design Summary Performance Targets / Data Sources / Reporting Assumptions and Indicators Mechanisms Risks associated facilities to m3/d/day raw water institutional development and resettlement supply potable water transmission pipelines of including number of staff activities are 48 km, water distribution trained, training courses, effectively pipelines of 123 km by and improved implemented 2015 organizational systems • Timely provision and procedures of Implementation Capacity building of support by loan Chongqing PMO and the implementation district/county PMOs and consultants IAs by 2011-2015 Risks Refine PPMS established • Recruitment of in 2010 loan implementation A 5-year (2010–2016) consultants is training plan for project delayed management, O&M, • Local geological financial management conditions and and institutional geohazards development adversely affect Organization structure construction and financial activities. management systems • Costs are much enhanced higher than foreseen. Environment and Inclusion of Women’s Monitoring reports, training • Exceptional hygiene awareness Federation as a key program completion weather affects and training project stakeholder; reports the seasonal program hygiene promotion construction activities carried out in 4 Contract/labor records, period. Separate awareness villages in 4 sub- training records, training for men and components in Youyang monitoring reports women on health and and Yunyang safety and HIV/STIs prevention during contractor mobilization Activities Inputs Road sub-components ADB Activity (1) Design the facilities, acquire land, and procure the works by 2013. • $100 million loan Activity (2) Construct 362 km of new and upgraded roads by 2015. • Undertake review missions Water supply sub-components • Provide training in Activity (3) Design the facilities, acquire land, and procure the works by 2013. ADB requirements Activity (4) Construct water intake by 2015. and procedures 3 Activity (5) Construct 48 km of water transmission pipes and 72,500 m /d intermediate pumping station by 2015. CMG and IAs Activity (6) Construct 72,500 m3/d water treatment plant by 2015. • About $113.4 Activity (7) Construct 123 km of water distribution pipes by 2015. million equivalent in counterpart Project Management and Capacity Building funds Activity (8) Strengthen financial management and corporate governance in water • Undertake on- supply agencies/companies in component counties with water supply sub- lending components by 2015. arrangements Activity (9) Complete necessary organizational arrangements for IAs (hiring staff, and loan funds setting up accounting systems, and improving financial, administrative, and management human resource policies and procedures) by 2010. • Hire design Activity (10) Develop plans, budgets, and procedures for loan implementation and institutes and project control in Chongqing PMO by 2010. secure other Activity (11) Complete Chongqing PMO and IA staff training (training in ADB consulting procedures, procurement, traffic management, road maintenance, water services supply, pollution control, environmental monitoring, and financial • Contract management) by 2015. tendering, select Activity (12) Chongqing PMO and IAs refine the PPMS and establish targets and contractors, procedures no later than 6 months after loan effectiveness. contract Activity (13) Complete implementation of the RPs, EMDP, SAP, and GAP by 2015. management • Support institutional

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Design Summary Performance Targets / Data Sources / Reporting Assumptions and Indicators Mechanisms Risks strengthening and capacity building • Provide resources for public information and consultation activities ADB = Asian Development Bank, EMDP = ethnic minority development plan, 11FYP = eleventh Five-Year Plan, GAP = gender action plan, IA = implementing agency, km = kilometer, m = meter, m2 = square meter, m3/d = cubic meter per day, mg/m3 = milligram per cubic meter, O&M = operation and maintenance, PMO = project management office, PPMS = project performance management system, RP = resettlement plan, SAP = social action plan.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 2 SECTOR AND SUBSECTOR ANALYSIS

A. Urban-Rural Infrastructure Development

1. Unprecedented economic growth in the People’s Republic of China (PRC), achieving an annual growth rate of 9.8% for nearly three decades, has enabled unparalleled nationwide investment and expansion of urban infrastructure. Many major cities and urban areas have fully-functioning infrastructure systems, particularly in water supply, transportation, energy and telecommunications, with substantial gains being progressively achieved in waste management and environmental protection. Concurrent with these achievements, the PRC’s 11th Five-Year Plan (11FYP, 2006-2010) reorients and prioritizes the nation’s development focus towards equitable, balanced and inclusive regional and urban-rural development, to progressively close the divide between urban and rural disparities by supporting rural socio-economic development. It is universally recognized that the provision of basic urban-rural infrastructure is vital in achieving this goal.

2. Economically, the PRC has a substantial east-west divide; the western PRC has a per capita income of only 69% of the national average, contributes less than 20% of national GDP, and is home to over half of PRC’s low income people. The west’s lack of economic growth relates directly to the lack of infrastructure; less than one-third of villages are accessible by paved roads, and less than one half of rural residents have piped water supplies. Coupled with this national disparity are the urban-rural disparities within the west’s urbanized areas. In the municipality of Chongqing, which has an approximately 50% rural population, more than 60% of its 8,967 villages lacked paved roads and over 20% suffered from water shortages in 2008, with infrastructure provision generally deteriorating outwards from its urban center. Urban-rural infrastructure development has not kept up with the increasing demands of Chongqing’s outer-lying areas, which hinders investment, degrades the environment and limits growth.

3. State Council’s recognition of the urban-rural development challenge has resulted in Chongqing being designated as the first provincial-level pilot area for integrated urban-rural development. 38 This national recognition provides the overall context for the Project; to develop a pioneering and innovative urban-rural infrastructure demonstration project, with a strong potential for regional and national replication. The Project targets municipal-wide improvements in the water supply and rural road sectors, two vital and intricately linked infrastructure sectors, which can dramatically improve rural living conditions and stimulate economic growth. The Project targets the poorer rural areas of Chongqing, which currently endure rudimentary, poor quality roads and inadequate water supply systems, primarily due to their remoteness, to terrain difficulties and to either a lack of water supply sources or lack of ability to harness them.

B. Rural Roads Sector

4. The rural road network includes county, township and village roads. Guided by state and municipal directives, transport bureaus in districts and counties are instrumental in transport master plan preparation, which outline road construction projects and costs for a five-year period. Once identified, three conditions are necessary for a road project to proceed to construction; it has to be included in the road construction program, have an approved feasibility study, and the proponent agency has to have identified project funding.

38 This is reflected in the nationally recognized ‘3-1-4 overall deployment’ strategy, which outlines three overall goals, one major task and four primary objectives for Chongqing. Within the context of the major task of ‘realizing a better-off society in the west’, one of the three primary goals is to achieve ‘balanced urban-rural development’, whereas the four primary objectives relate to accelerating rural development, improving livelihoods, reforming the industrial base, and upgrading capabilities through municipal construction.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 5. District and county governments are also instrumental in road construction; their transport bureaus are responsible for all rural roads in their jurisdictions. Either directly, or through designated road construction companies, they construct county, township and village roads, and also guide towns and townships in rural road implementation. Reportedly, investments in rural road construction are often inadequate to meet urban-rural demands. Regarding maintenance, the Chongqing Municipal Road Bureau39 has overall responsibility for managing rural road maintenance, including, (i) formulating the planning framework for rural roads classification and maintenance, (ii) developing an annual subsidy plan, (iii) supervising and inspecting maintenance plan implementation and quality, and (iv) overall guidance and supervision. The district and county transport bureaus are responsible for rural road management within their jurisdictions, including (i) organizing maintenance plans, (ii) formulating annual maintenance budgets for municipal level review, (iii) managing maintenance funds and fund allocations to towns/townships and villages, and (iv) managing road maintenance works performance.

6. County roads are maintained by district and county transport bureaus, township roads by town and township road maintenance organizations, and village roads by village committees. Where towns and townships lack sufficient resources for maintenance, or do not have a maintenance department at all, then the respective district or county transport bureau will maintain their roads. Similarly at the village level, a town or township road maintenance organization will take over village road maintenance where a village lacks the necessary maintenance resources.

7. Historically, the Chongqing Municipal Transport Commission (CMTC) provided annual funding for all road maintenance through the ‘road maintenance fee subsidy’ on a ‘kilometer-year’ basis, which was topped up by district and county finance bureaus (for county roads), town and township governments (for township and village roads), and village committees (for village roads). Although regulations required that 80% of road maintenance fee subsidies be utilized for road maintenance and management, in practice, it is reported that the allocated ‘kilometer-year’ subsidies were often lower than specified, and that district/county funds disbursement was not necessarily very transparent. The sub-allocation of funds to towns and townships and villages, and consistent access to road maintenance funds were far from guaranteed.

8. A fuel tax, where funds are channeled to the Chongqing Municipal Government (CMG) Finance Bureau, then to CMTC to fund rural road maintenance and other activities, has recently replaced the maintenance subsidy system. CMTC indicates that these new subsidies will not be lower than the previous amounts, which in 2008 for Chongqing municipality were CNY213 million ($31.3 million). The existing funding mechanisms can create uncertainties in rural road maintenance funding; the fuel tax is still being established, local level funding is unstable, and resources are often inadequate to cover routine maintenance and periodic repairs.40 Overloaded trucks exacerbate the situation by seriously damaging road pavements.

9. District and county road maintenance organizations follow official guidance documents on rural road maintenance. At the town and township level, maintenance operations are generally restricted to routing maintenance tasks. At the village level, village committees perform simple maintenance functions, supervised by town and township road maintenance organizations, under the auspices of the district and county road maintenance organizations. Road safety assessments are now required for all new roads in the Chongqing municipality, and traffic management and controls have been introduced and are being progressively enforced. Policies are also in place to promote rural passenger transport, with the objective of providing passenger transport services to all of Chongqing’s accessible towns and townships and villages by 2012.

39 Under the Chongqing Municipal Transport Commission. 40 CMG, through the Chongqing project management office (CPMO), has however confirmed that sufficient maintenance budgets and resources will be provided to fully maintain all roads constructed under the Project.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

C. Rural Water Supply Sector

10. Rapid economic growth in the PRC has exacerbated water resource depletion and the deterioration of the water environment. Water shortages due to the pollution of water sources are a key reason for the inadequacy of potable water. This threatens the drinking water safety of urban and rural residents alike. As a result, national guidance provided in the 11FYP41 establishes the goal of improving rural water supplies, targeting improvements to a total rural population of 160 million people. For this initiative, approximately half of the required total investment of CNY65.5 billion ($9.63 billion) is provided from central government sources, with the balance being provided from provincial or municipal, district and county and town and township governments. Focusing at the district and county level, the 11FYP requires involved government agencies to develop and implement water supply projects to achieve this goal, and to promote the centralization of rural water treatment systems.

11. In Chongqing, the annual per capita level of water resources is estimated at 1,800 m3, only two-thirds of the national average. Chongqing’s water scarcity is not so much in the resource itself, but in the inefficiency of water resource use, and insufficiency of infrastructure to deliver the resource. At present, 375 towns and townships, and over one- third of its villages do not have access to tap water. Many water supply facilities are aged, network coverage is low, and water source production capabilities are inadequate. Often, water supply pipes and channels have been poorly constructed; and breakages and blockages are serious. In the rural areas, some of the groundwater sources have high fluorine content, taste bitter, and are not hygienic. Below are the water sources for the proposed water supply sub-components. Based on annual average data and future requirements for irrigation, water supply and water loss due to seepage and evaporation, the water sources are more than enough to supply the requirements of the project including other water uses.

Table A2.1a: Water Balance Analysis in Water Sub-components Sub-component Longtan Mawang Jiangkou Nixi Yanglu Annual Average Data (m3) Longtan Shengli Fanshui Shidangou Hanjiagou Water Sources Reservoir Reservoir River River River Flow 80,153,000 13,412,000 22,204,000 13,660,000 13,435,000 Use Irrigation 5,304,000 3,536,000 - - - Water supply sub-component 7,186,000 4,791,000 1,916,000 263,000 395,000 Water loss due to seepage 16,031,000 2,682,000 4,441,000 2,732,000 2,687,000 and evaporation Surplus 51,632,000 2,403,000 15,847,000 10,665,000 10,353,000 m3 = cubic meter.

Table A2.1b: Water Balance Analysis in Water Sub-components Sub-component Hongtu Caotang Longjing Gaoguan Annual Average Data (m3) Xiaoba Jiuyanlong Jinjigou Water Sources Yudu River River Spring Reservoir Flow 11,323,000 7,300,000 5,172,000 3,577,000 Uses Irrigation -- - - Water supply sub-component 192,000 1,825,000 958,000 511,000 Water loss due to seepage and evaporation 2,265,000 - 1,034,000 748,000 Surplus 8,866,000 5,475,000 3,180,000 2,318,000

41 The ‘National Eleventh Five Year Plan on Safe Drinking Water Supplies for Rural Villages’. The 11FYP requirements are further defined in the ‘Notification Concerning the Strengthening of the Construction and Operation Management of Safe Rural Drinking Water Supplies’ which was jointly issued by NDRC, the Ministry of Water Resources and Ministry of Health (July 2007).

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report m3 = cubic meter.

12. Rural water supply sector development follows a well-defined procedure. Each year, the Chongqing Development and Reform Commission (DRC) and Water Resources Bureau (WRB) review previous activities and develop rural water sector priorities, a water supply project construction program and funding proposals, which are reviewed and approved at the national level by the National DRC and the Ministry of Water Resources (MWR). Once approved, the projects are developed under the direction of district and county WRBs. Water supply enterprises or project management committees, who usually undertake the construction of larger, centralized rural systems, then either operate the systems themselves or transfer them to a town or township ‘water management station’ to operate. Local village ‘water users associations’ normally construct and operate smaller centralized village-level systems under the direction of district and county WRBs. District and county WRBs monitor the operation and maintenance (O&M) performance of rural water supply systems, including asset O&M, water conservation, tariff collection, water source protection and water quality monitoring.

13. Policy stipulates that rural water consumers can be charged, based on the quantity of water supplied (DRC, 2007). This allows implementing agencies to gradually introduce water tariff mechanisms and to integrate subsidy mechanisms where necessary. District and county price bureaus, in consultation with WRBs, are mandated to establish and adjust water tariff levels through formal procedures which include public consultation. District and county health bureaus monitor rural water supply systems to ensure water quality attains minimum national drinking water standards, and require WRBs to take action where it does not.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 3 DEVELOPMENT COORDINATION

A. Major Development Partners: Strategic Foci and Key Activities

1. External assistance to the Chongqing Municipal Government in implementing its plans for an improved urban environmental and associated infrastructure provision has come mainly from the World Bank. The Project will be the first ADB-financed project in Chongqing to improve urban rural infrastructure. Since 1992, ADB has provided 32 loans totaling more than $3.8 billion to the People's Republic of China (PRC) for environmental improvement and infrastructure projects. ADB has also provided $56 million for more than 82 TA studies for policy reform, institutional strengthening, environmental management, poverty reduction, and project preparation.

Table A3.1: Assistance Funded by Foreign Aid Agencies for Chongqing Municipality for Infrastructure and Agriculture and Environmental Improvement (1997 to date) Major Development Partners Amount Total Development of Loan Sectors and Themes Project Name Duration Investment Partner ($ (CNY billion) million) Transport ADB Chongqing Expressway 1996-2002 3.43 150 Transport ADB Leichong Expressway 2000-2005 2.72 120 Urban environmental Chongqing Urban improvement World Bank 1998-2008 4.00 180 Environment Project (Phase I & II) Water supply and Chongqing Small Cities other municipal 2005- World Bank Infrastructure Improvement 2.50 180 infrastructure and Present Project services Chongqing Urban-Rural For Multisector World Bank Coordinated Development approval 1.30 84 Project 2010 Government of Line 1 of Rail Transit Project, 2007- Transport 12.51 280 Germany Phase I Present Line 2 of Rail Transit Project, Transport JBIC 2000-2004 3.20 225 Phase I Line 3 of Rail Transit Project, Transport JBIC 2007-2010 5.82 200 Phase I Changshou – Liangping Transport JBIC 2000-2005 3.20 198 Expressway Project Liangping – Wanzhou Transport JBIC 1999-2003 2.85 167 Expressway Project Urban Power Grid Energy JBIC 1998-2004 1.69 115 Renovation Project Water supply and other municipal Fengshouba Water Plant JBIC 2002-2005 1.20 50 infrastructure and Project services Urban environmental China-Japan Environmental JBIC 1999-2005 1.12 58 improvement Model Cities Project Water supply and other municipal Chongqing Main Districts JBIC 2002-2005 9.33 75 infrastructure and Drainage Project, Phase II services JBIC = Japan Bank for International Cooperation. Source: Chongqing project management office.

B. Institutional Arrangements and Processes for Development Coordination

2. ADB commits itself to sharing sectoral information and experiences in partnership with its developing member countries and other development agencies. In line with ADB's support for the 2005 Paris Declaration and the 2008 Accra Agenda for Action, it has been actively harmonizing its policies, procedures and practices with its key development partners

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report through parallel implementation structures, technical working groups, and joint missions. In addition, ADB has also been supporting global and regional efforts to enhance aid effectiveness.

3. In the PRC, development coordination is done mainly by government at the central level. All the development partners are requested to align their operations to support the implementation of a national development strategy as set in their five year plan (FYP) for social and economic development approved by the People's Congress. The PRC Resident Mission also plays a key role in harnessing lessons learned in project design, implementation, and monitoring to be shared with other partners in the sector.

C. Achievements and Issues

4. Since 1992, coordination with major development partners are getting stronger to support the PRC's FYP, strategic master plans, public awareness and education, financial and institutional strengthening, MDG goals, and other development results in the sector. The Project team met with development partners such as the World Bank and other bilateral development agencies to share project processing and implementation experiences. There are separate project management offices established for ADB and World Bank projects within the Chongqing Development and Reform Commission.

D. Recommendations

5. The Project team will continue to closely coordinate with other development partners during project implementation. Strengthening development coordination in the PRC is expected to minimize transaction costs, maximize responsiveness, address policy issues more systematically, provide greater support for institutional strengthening and capacity building, and promote increased accountability to achieve greater development impact.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 4 DETAILED DESCRIPTION OF SUB-COMPONENTS

1. The Project has twenty-one (21) road sub-components and nine (9) water supply sub-components (outputs) in eight poverty district and counties of Chongqing Municipality. The road sub-components include new and upgraded urban-rural roads and the water supply sub-components include new water treatment plants, pipelines and associated facilities.

2. Road Sub-components. The 21 road sub-components include the construction of new and upgraded urban-rural roads with a total length of 362 kilometers (km): Fuling District (two sub-components, 24 km), Qianjiang District (one sub-component, 67 km), Youyang County (three sub-components, 22 km), Xiushan County (one sub-component, 31 km), Yunyang County (four sub-components, 65 km), Fengjie County (four sub-components, 83 km), Wushan County (five sub-components, 40 km), and Chengkou County (one sub- component, 30 km).

3. Water Supply Sub-components. The nine (9) water supply sub-components include the construction of new water treatment plant, pipelines, and associated facilities. The cumulative treatment capacity of the sub-components is approximately 72,500 cubic meters per day (m3/day), and also includes the installation of 48 kilometers (km) of water transmission pipelines and 123 km of water distribution pipelines. The water supply components will be developed in the following counties: Youyang County (two sub- components), Yunyang County (three sub-components), Fengjie County (two sub- components), Wushan County (one sub-component), and Chengkou County (one sub- component).

4. Institutional capacity development is also being provided including: (i) training to strengthen the organizational structures and staff resources of agencies which will implement, operate, and maintain the road and water supply sub-components; (ii) strengthening of management practices in human resources, finance, and corporate planning; and (iii) support for the Government’s public awareness program to ensure sustainability of project benefits. This will enhance the organization structure and financial management systems of the Chongqing Project Management Office (PMO), district and county PMOs, the implementing agencies (IAs) and the implementing units (IUs).

Table A4.1: Sub-Components Sub-component Description A. Road Sub-components Fuling District component Wulingshan to Baitao Rd sub-component Upgraded road – Length 14.21 km; Class II 1. (Fuling Transport Co.) Width 8.5 m; Bituminous pavement Baisheng Town to Zhongxin Village Rd sub- Upgraded road – Length 10.07 km; Class III 2. component Width 8.5 m; Bituminous pavement (Fuling Transport Co.) Qianjiang District component Houba to Huangxi Rd sub-component Upgraded road – Length 66.77 km, Class IV 3. (Qianjiang District City Construction Investment Width 6.5 m (for 34.37 km)/4.5 m (for 32.4 km) (Group) Co.) Bituminous pavement Youyang County component New road – Length 2.7 km, 0.5 m Class II and 2.2 m Ganxi to Railway Station Rd sub-component Class III 4. (Youyang Longda Road Construction Co.) Width 12 m (for 0.5 km)/8.5m (for 2.2 km) Bituminous pavement Length 12.71 km (5.71 km new, 7 km upgraded), Class Heishui to Maoba Rd sub-component 5. IV (Youyang Longda Road Construction Co.) Width 6.5 m, Bituminous pavement Shuicao to Yaojiatuo Rd sub-component Upgraded road – Length 6.81 km, Class IV 6. (Youyang Longda Road Construction Co.) Width 6.5 m, Bituminous pavement Xiushan County component Meijiang Town to Yunai Rd sub-component Upgraded road – Length 31.37 km, Class III 7. (Xiushan Huaxin State Assets Co.) Width 7.5 m, Bituminous pavement

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Sub-component Description Yunyang County component Nongba Town Rd sub-component Upgraded road – Length 21.8 km, Class IV 8. (Yunyang Transport Co.) Width 6.5 m, Cement concrete pavement Yanglu Township Rd sub-component Upgraded road – Length 17.52 km, Class IV 9. (Yunyang Transport Co.) Width 6.5 m, Cement concrete pavement Yaoling to Qingshui Rd sub-component Upgraded road – Length 15.81 km, Class IV 10. (Yunyang Transport Co.) Width 6.5 m, Cement concrete pavement Nixi Township Rd sub-component Upgraded road – Length 9.75 km, Class IV 11. (Yunyang Transport Co.) Width 6.5 m, Cement concrete pavement Fengjie County component Tuxiang Town Rd sub-component Upgraded road – Length 22.48 km, Class IV 12. (Fengjie Roads & Bridges Co.) Width 6.5 m, Cement concrete pavement Hongtu Township Rd sub-component Upgraded road – Length 18.05 km, Class IV 13. (Fengjie Roads & Bridges Co.) Width 4.5 m, Cement concrete pavement Caotang Town Rd sub-component Upgraded road – Length 13.47 km, Class IV 14. (Fengjie Roads & Bridges Co.) Width 4.5 m, Cement concrete pavement Qinglong Town Rd sub-component Upgraded road – Length 29.37 km, Class IV 15. (Fengjie Roads & Bridges Co.) Width 6.5 m, Cement concrete pavement Wushan County component Baiquan Village Rd sub-component Upgraded road – Length 7.76 km, Class III 16. (Wushan Transport Development Co.) Width 7.5 m, Cement concrete pavement Baishui Village Rd sub-component Upgraded road – Length 8.9 km, Class III 17. (Wushan Transport Development Co.) Width 7.5 m, Cement concrete pavement Hongmiao Village Rd sub-component Upgraded road – Length 7.96 km, Class III 18. (Wushan Transport Development Co.) Width 7.5 m, Cement concrete pavement Shili Village Rd sub-component Upgraded road – Length 3.62 km, Class III 19. (Wushan Transport Development Co.) Width 7.5 m, Cement concrete pavement Xiping Village Rd sub-component Upgraded road – Length 11.4 km, Class III 20. (Wushan Transport Development Co.) Width 7.5 m, Cement concrete pavement Chengkou County component Length 29.54 km (24 km new, 5.54 km upgraded), Class Gaoguan Town Rd 2 sub-component 21. IV (Chengkou Transport Bureau) Width 6.5 m, Bituminous pavement

B. Water Supply Sub-components Youyang County component Capacity: 30,000 m3/d (structures of 6,000 m3/d have Longtan Town water supply sub-component been constructed) 1. (Chongqing Xinyou Water Supply Co.) 0.24 km of transmission pipelines 20.8 km of distribution pipelines Capacity: 20,000 m3/d Mawang Town water supply sub-component 2. 16.4 km of transmission pipelines (Chongqing Xinyou Water Supply Co.) 16.5 km of distribution pipelines Yunyang County component Jiangkou Town water supply sub-component Capacity: 8,000 m3/d (structures of 5,000 m3/d have 3. (Yunyang Jinyu Water Resources & Electricity been constructed), 24 km of transmission pipelines Co.) 32.1 km of distribution pipelines Nixi Town water supply sub-component 3 Capacity: 1,000 m /d, 4.5 km of transmission pipelines 4. (Yunyang Jinyu Water Resources & Electricity 4.5 km of distribution pipelines Co.) Yanglu Town water supply sub-component 3 Capacity: 1,500 m /d, 5.6 km of transmission pipelines 5. (Yunyang Jinyu Water Resources & Electricity 11.8 km of distribution pipelines Co.) Fengjie County component Caotang Town water supply sub-component Capacity: 5,000 m3/d, 5.1 km of transmission pipelines 6. (Fengjie Xinquan Water Supply Co.) 3.4 km of distribution pipelines Hongtu Township water supply sub-component Capacity: 800 m3/d, 3.1 km of transmission pipelines 7. (Fengjie Xinquan Water Supply Co.) 1.2 km of distribution pipelines Wushan County component Longjing Township water supply sub- component Capacity: 4,200 m3/d, 0.34 km of transmission pipelines 8. (Wushan Longsheng Construction & 12.63 km of distribution pipelines Development Co.) Chengkou County component Gaoguan Town water supply sub-component Capacity: 2,000 m3/d, 0.4 km of transmission pipelines 9. (Chengkou Water Supply Co.) 8.4 km of distribution pipelines Co. = company, km = kilometer, m3 = cubic meter, m3/d = cubic meter per day, WTP = water treatment plant. Source: Revised Feasibility Study Reports, September 2009.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 5 SUMMARY COST ESTIMATES AND FINANCING PLAN

Table A5.1: Summary Cost Estimates CNY million $ million % of Total Item Foreign Exchange Local Currency Total Foreign Local Currency Total Base Cost Costs Costs Costs Exchange Costs Costs Costs A. Investment Cost a 1. Civil Works Roads 222.42 518.79 741.21 32.71 76.29 109.0 58.87 water supply 93.64 140.49 234.13 13.77 20.66 34.43 18.60 2. Equipment Roads 1.29 11.75 13.04 0.19 1.73 1.92 1.04 water supply 1.64 15.03 16.67 0.24 2.21 2.45 1.32 3. Land Acquisition and Resettlement 0.00 139.73 139.73 0.00 20.55 20.55 11.10 4. Survey, Research, Design, and Services 0.00 94.80 94.80 0.00 13.94 13.94 7.53 Subtotal (A) 318.99 920.59 1,239.58 46.91 135.38 182.29 98.46 B. Institutional Strengthening 1. Project Management and Capacity Building 13.85 5.19 19.04 2.04 0.76 2.80 1.51 2. Pilot Demonstration Activity* 0.34 0.00 0.34 0.05 0.00 0.05 0.03 Subtotal (B) 14.19 5.19 19.38 2.09 0.76 2.85 1.54 Total Base Costs 333.18 925.78 1,258.96 49.00 136.14 185.14 100.00 C. Contingencies 1. Physical b 33.32 92.57 125.89 4.90 13.61 18.51 10.00 2. Price c 4.39 30.72 35.11 0.65 4.51 5.16 2.79 Subtotal (C) 37.71 123.29 161.00 5.55 18.12 23.67 12.78 D. Financing Charges during Implementation d 1. Interest during Implementation 31.00 0.00 31.00 4.56 0.00 4.56 2.46 2. Commitment Charges 3.36 0.00 3.36 0.49 0.00 0.49 0.26 Subtotal (D) 34.36 0.00 34.36 5.05 0.00 5.05 2.73 Total Project Costs (A+B+C+D) 405.25 1049.07 1454.32 59.60 154.26 213.86 115.51 a In November 2009 prices and an exchange rate of CNY6.8 to $1. b Physical contingencies computed at 10% of Total Base Costs. c Price contingencies computed by year and expenditure type based on cumulative domestic and foreign price inflation d Includes interest during construction (IDC) and commitment Fee (CF) for Asian Development Bank (ADB) interest during construction for ADB loan has been computed at the 5-year forward London interbank offer rate (LIBOR) at 12 November 2009 of 2.62% plus a spread of 0.2%, and a commitment fee (CF) of 0.15% on undrawn balance. * PDA will be financed by a grant of $50,000 under RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Table A5.2: Financing Plan ($ million) Item Cost ADB Loan ADB Grant Government Amount % of Cost Category Amount % of Cost Category A. Investment Cost a 1. Civil Works Roads 109.0 70.56 65 38.44 35 water supply 34.43 22.27 65 12.16 35 2. Equipment Roads 1.92 1.92 100 0.00 0 water supply 2.45 2.45 100 0.00 0 3. Land Acquisition and Resettlement 20.55 0.00 0 20.55 100 4. Survey, Research, Design, and Services 13.94 0.00 0 13.94 100 Subtotal (A) 182.29 97.20 53 85.09 47 B. Institutional Strengthening 1. Project Management and Capacity Building 2.80 2.80 100 0.00 0 2. Pilot Demonstration Activity* 0.05 0 0 0.05 0.00 0 Subtotal (B) 2.85 2.85 100 0.05 0.00 0 Total Base Costs 185.14 100.05 54 0.05 85.09 46 C. Contingencies 1. Physical b 18.51 0.00 0 18.51 100 2. Price c 5.16 0.00 0 5.16 100 Subtotal (C) 23.67 0.00 0 23.67 100 D. Financing Charges during Implementation d 1. Interest during Implementation 4.56 0.00 0 4.56 100 2. Commitment Charges 0.49 0.00 0 0.49 100 Subtotal (D) 5.05 0.00 0 5.05 100 Total Project Costs (A+B+C+D) 213.86 100.05 47 0.05 113.81 53 % Total Project Cost 100% 47% 53% a In November 2009 prices and an exchange rate of CNY6.8 to $1 b Physical contingencies computed at 10% of Total Base Costs. c Price contingencies computed by year and expenditure type based on cumulative domestic and foreign price inflation d Includes interest during construction (IDC) and commitment Fee (CF) for Asian Development Bank (ADB) interest during construction for ADB loan has been computed at the 5-year forward London interbank offer rate (LIBOR) at 12 November 2009 of 2.62% plus a spread of 0.2%, and a commitment fee (CF) of 0.15% on undrawn balance. * PDA will be financed by a grant of $50,000 under RETA 6498: Knowledge and Innovation Support for ADB's Water Financing Program.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 6 ONLENDING ARRANGEMENTS AND INDICATIVE FUNDS FLOW

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 7 PROJECT ORGANIZATION Executing Agency

Chongqing Municipal Government Chongqing PLG

Chair: CMG Vice Mayor CMG Deputy Secretary General Devt. & Reform Commission (DRC) Finance Bureau Poverty Alleviation Office Transport Commission Chongqing PMO Water Resources Bureau Audit Bureau Environmental Protection Bureau Director: DRC Chief Economist Land Resources Bureau Resettlement Bureau Chief DRC Foreign Capital Dept. (Vice) Construction Bureau Dep. Chief DRC For. Cap. Dept. (Vice) Officers (5) Project Implementation Implementing Agencies Support Project Implementation District/County PLGs Total of 8 Consultants (PIC) District/County Government Implementing Agencies District/County PLG Established for Each of the 8 District/County External Monitors Implementing Agencies Environmental, Social, Membership from Personnel of the Resettlement Following District/County Government Offices

Chair Design Institutes County Mayor or Deputy County Mayor Engineering, Technical or Deputy District Commissioner District/County PMOs Members County/District DRC Transport Commission District/County PMO Established for Poverty Alleviation Office Each of the 8 District/County Construction Commission Implementing Agencies Women’s Federation Town/Township Governments Director Infrastructure Companies District/County DRC Director Design Institutes County Coordination Office or: District/County DRC Vice Dir. Finance Bureau or: County Coord. Office Dir. Environmental, Social, Audit Bureau Resettlement Safeguards Planning Bureau Professional Staff Land and Housing Professional Staff From Various Environmental Protection Bureau District/County Agencies Civil Affairs Bureau Health Bureau Ethnics and Religion Bureau Statistics Bureau

Implementing Units Total of 13 Implementing Units; 8 Roads Implementing Units Project Management Teams 5 Water Supply Implementing Units Project Management Team Established for Each of the 13 Implementing Units Procurement Supervision Professional Staff Relevant staff of each Tendering Agencies Respective Implementing Unit

Construction Contracts Construction Contractors

Construction Management Construction Supervision Agencies

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 8 IMPLEMENTATION SCHEDULE Task Name Start Finish 2010 2011 2012 2013 2014 2015 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Fuling District Dec 2009 Sep 2013 Land Acquisition and Resettlement Mar 2010 Sep 2010 Design and Tender Documentation Dec 2009 Sep 2010 Tendering Jul 2010 Dec 2010 Wulingshan to Baitao Road Sep 2010 Aug 2013 Baisheng Town Road Dec 2010 Sep 2013

Qianjiang District Dec 2009 Sep 2013 Land Acquisition and Resettlement Mar 2010 Sep 2010 Design and Tender Documentation Dec 2009 Sep 2010 Tendering Apr 2010 Jun 2010 Houba to Heixi Road Jun 2010 Jun 2013 Heixi to Huangxi Road Oct 2010 Sep 2013

Youyang County Dec 2009 Dec 2013 Land Acquisition and Resettlement Mar 2010 Sep 2010 Design and Tender Documentation Dec 2009 Sep 2010 Tendering Apr 2010 Sep 2010 Ganxi Town to Railway Station Road Jun 2010 Jun 2013 Heishui to Maoba Road Jun 2010 Jun 2013 Shuicao to Yaojiatuo Road Jun 2010 Jun 2013 Longtan Town Water Supply Jun 2010 Sep 2013 Mawang Town Water Supply Oct 2010 Dec 2013

Xiushan County Dec 2009 Dec 2014 Land Acquisition and Resettlement Mar 2010 Dec 2011 Design and Tender Documentation Dec 2009 Dec 2011 Tendering Jun 2010 Dec 2010 Meijiang – Zhongling Township Sep 2010 Jun 2013 Zhongling Township – Shizikou Road Jan 2011 Dec 2013 Shizikou Tunnel Jan 2011 Dec 2013 Shizikou – Yunai Road Sep 2010 Jun 2013

Yunyang County Dec 2009 Mar 2014 Land Acquisition and Resettlement Mar 2010 Mar 2011 Design and Tender Documentation Dec 2009 Mar 2011 Tendering Apr 2010 Mar 2011 Nongba Town Road Sep 2010 Jun 2013 Yanglu Township Road Dec 2010 Sep 2013 Nixi Township Road Feb 2011 Dec 2013 Yaoqing to Qingshui Road Apr 2011 Mar 2014 Jiangkou Town Water Supply Sep 2010 Sep 2013

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Task Name Start Finish 2010 2011 2012 2013 2014 2015 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Nixi Township Water Supply Nov 2010 Sep 2013 Yanglu Township Water Supply Jan 2011 Sep2013

Fengjie County Dec 2009 Mar 2014 Land Acquisition and Resettlement Mar 2010 Mar 2011 Design and Tender Documentation Dec 2009 Mar 2011 Tendering Apr 2010 Mar 2011 Tuxiang Town Road Sep 2010 Jun 2013 Hongtu Township Road Dec 2010 Sep 2013 Caotang Town Road Feb 2011 Dec 2013 Qinglong Town Road May 2011 Mar 2014 Caotang Town Water Supply Sep 2010 Sep 2013 Hongtu Township Water Supply Dec 2010 Sep 2013

Wushan County Dec 2009 Jun 2012 Land Acquisition and Resettlement Mar 2010 Jun 2011 Design and Tender Documentation Dec 2009 Jun 2011 Tendering Apr 2010 Jun 2011 Baiquan Village Road Sep 2010 Jun 2013 Baishui Village Road Dec 2010 Sep 2013 Hongmiao Village Road Feb 2011 Dec 2013 Shili Village Road May 2011 Mar 2014 Xiping Village Road Jun 2011 Jun 2014 Longjing Township Water Supply Sep 2010 Aug 2011

Chengkou County Dec 2009 Sep 2013 Land Acquisition and Resettlement Mar 2010 Oct 2010 Design and Tender Documentation Dec 2009 Oct 2010 Tendering Jul 2010 Dec 2010 Gecheng Town – Baige Xiuqi Town Road Sep 2010 Jun 2013 Baige Xiuqi Town – Gaoguan Town Dec 2010 Sep 2013 Road Gaoguan Town Water Supply Sep 2010 Aug 2011

Institutional Development and Jul 2010 Jun 2015 Training

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 9 SUMMARY AND DETAILED PROCUREMENT PLAN Project Name: PRC: Chongqing Urban-Rural Loan Number______Infrastructure Development Demonstration Project Loan Amount: $100 million Executing Agency: Chongqing Municipal Government Date of first Procurement Plan (loan approval Date of this Procurement Plan: February date) ______2010

A. Section 1: Process Thresholds, Review and 18-Month Procurement Plan

1. Project Procurement Thresholds

1. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Table A9.1: Procurement of Goods and Works Method Threshold ICB for Works a >$10 million and above ICB for Goods a >$1 million and above NCB for Works a

2. ADB Prior or Post Review

2. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the Project.

Table A9.2: Procurement of Goods and Works Procurement Prior or Post Comments Method ICB Works Prior ICB Goods Prior NCB Works The first NCB procurement documents and/or the first civil NCB Goods works bidding document for each IA should be submitted for ADB review and approval; subsequent NCB will be reviewed post contract award. Shopping for Works Post Shopping for Goods Post ICB = international competitive bidding, NCB = national competitive bidding.

Table A9.3: Recruitment of Consulting Firms and Individual Consultants Procurement Method Prior or Post Comments Firm QCBS a Prior QBS Prior Other selection methods: CQS, LCS, FBS, and SSS Prior Individual Consultants Individual Consultants Prior CQS = consultants qualification selection, FBS = fixed budget selection, LCS = least cost selection, QBS = quality-based selection, QCBS = quality- and cost-based selection, SSS = single source selection. a A fixed quality-cost ratio of 80:20 will be used.

3. Goods and Works Contracts Estimated to Cost More than $1 million

3. The following table lists goods and works contracts for which procurement capacity is expected to commence within the next 18 months.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

Table A9.4: Goods and Works Contracts Contract Procurement Expected Date of ADB General Description Value Method Advertisement Review ($ million) Works Fuling District T-FL-C01 Wulingshan to Baitao Rd 8.61 NCB Jun 2010 Prior T-FL-C02 Baisheng Town to Zhongxin Village 3.85 NCB Sep 2010 Post Rd Qianjiang District T-QJ-C01 Houba to Heishui Rd 8.99 NCB Feb 2010 Prior T-QJ-C02 Heishui to Huangxi Rd 5.87 NCB Jul 2010 Post Youyang County T-YoY-C01 Ganxi to Railway Station Rd, Heishui 6.34 NCB Feb 2010 Prior to Maoba Rd, Shuicao to Yaojiatuo Rd W-YoY-C01 Longtan Town water supply (water 9.33 NCB Apr 2010 Post capture structures, water treatment works, water transmission and distribution pipelines, pumping stations) W-YoY-C02 Mawang water supply (water capture 8.11 NCB Jun 2010 Post structures, water treatment works, water transmission and distribution pipelines) Xiushan County T-XS-C01 Meijiang Town to Zhongling Township 5.37 NCB Jul 2010 Prior Rd T-XS-C02 Zhongling Township to Shizikou Rd 5.31 NCB Sep 2010 Post T-XS-C03 Shizikou Tunnel 5.03 NCB Sep 2011 Post T-XS-C04 Shizikou to Yunai Rd 5.21 NCB Jul 2010 Post Yunyang County T-YuY-C01 Nongba Town Rd & Yanglu Township 8.61 NCB Jun 2010 Prior Rd T-YuY-C02 Yaoling to Qingshui Rd & Nixi 5.63 NCB Sep 2010 Post Township Rd W-YuY-C01 Jiangkou Town water supply (water 8.01 NCB Aug 2010 Post capture structures, water treatment works, water transmission and distribution pipelines) W-YuY-C02 Nixi Town water supply (water 2.98 NCB Aug 2010 Post capture structures, water treatment works, water transmission and distribution pipelines) Fengjie County T-FJ-C01 Tuxiang Town Rd 5.49 NCB Jun 2010 Prior T-FJ-C02 Hongtu Township Rd & Caotang 6.84 NCB Sep 2010 Post Town Rd T-FJ-C03 Qinglong Town Rd 6.64 NCB Feb 2011 Post W-FJ-C01 Caotang Town water supply (water 2.59 NCB Jun 2010 Post capture structures, water treatment works, water transmission and distribution pipelines) Wushan County T-WS-C01 Baiquan Village Rd & Baishui Village 6.98 NCB Jun 2010 Prior Rd & Hongmiao Village Rd T-WS-C02 Shili Village Rd & Xiping Village Rd 3.90 NCB Feb 2011 Post W-WS-C01 Longjing Township water supply 2.31 NCB Jun 2010 Post (water capture structures, water treatment works, water transmission and distribution pipelines, pumping stations)

Chengkou County T-CK-C01 Gaoguan Town Rd 2-A part 5.50 NCB Jun 2010 Prior

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Contract Procurement Expected Date of ADB General Description Value Method Advertisement Review ($ million) (Gecheng Town to Xiuqi Town Baige Village) T-CK-C02 Gaoguan Town Rd 2-B Part (Xiuqi 4.81 NCB Sep 2010 Post Town Baige Village to Gaoguan Town) W-CK-C01 Gaoguan Town water supply (water 1.10 NCB Jun 2010 Post capture structures, water treatment works, water transmission and distribution pipelines, pumping stations) NCB = national competitive bidding. First column is reference number: T = traffic road, W = water supply, C = civil works, E = equipment. Highlighted contracts will be procured by advance contracting and retroactive financing.

4. Consulting Services Contracts

4. The following table lists consulting services contracts for which procurement capacity is expected to commence within the next 18 months.

Table A9.5: Consulting Services Contracts Advertisement International Contract Value Recruitment General Description Date or National Comments ($) Method (quarter/year) Assignment Project management and st 78,000 ICS 1 /2010 National procurement specialists Project Implementation QCBS nd Management and Capacity 2,722,000 2 /2010 Both (80:20) Building QCBS = quality- and cost-based selection. Highlighted contracts will be procured by advance contracting and retroactive financing.

5. Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100,000

5. The following table groups smaller-value goods, works and consulting services contracts for which procurement capacity is expected to commence within the next 18 months.

Table A9.6: Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100,000 Contract Expected Date Procurement ADB General Description Value of Method Review ($ million) Advertisement Youyang County Water pumps, chlorine & PAC dosing equipment, testing equipment, maintenance & repair W-YoY-E01 equipment, automation, 0.74 NCB Apr 2010 Prior instrumentation, electrical equipment, telecommunications and emergency vehicles Xiushan County Road maintenance T-XS-E01 0.37 NCB Jan 2012 Prior equipment Yunyang County Road maintenance T-YuY-E01 0.19 NCB Jan 2012 Post equipment Water pumps, chlorine & W-YuY-E01 PAC dosing equipment, 0.53 NCB Sep 2011 Prior testing equipment,

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Contract Expected Date Procurement ADB General Description Value of Method Review ($ million) Advertisement maintenance & repair equipment, automation, instrumentation, electrical equipment, telecommunications and emergency vehicles Fengjie County Road maintenance T-FJ-E02 0.29 NCB Jan 2012 Post equipment Water pumps, chlorine & PAC dosing equipment, testing equipment, maintenance & repair W-FJ-E01 equipment, automation, 0.48 NCB Sep 2011 Prior instrumentation, electrical equipment, telecommunications and emergency vehicles Wushan County Road maintenance T-WS-E01 0.23 NCB Jan 2012 Post equipment Water pumps, chlorine & PAC dosing equipment, testing equipment, maintenance & repair W-WS-E01 equipment, automation, 0.45 NCB Sep 2011 Prior instrumentation, electrical equipment, telecommunications and emergency vehicles Chengkou County Road maintenance T-CK-E01 0.17 NCB Jan 2012 Post equipment Water pumps, chlorine & PAC dosing equipment, testing equipment, maintenance & repair W-CK-E01 equipment, automation, 0.23 NCB Sep 2011 Prior instrumentation, electrical equipment, telecommunications and emergency vehicles NCB = national competitive bidding First column is reference number: T = traffic road, W = water supply, C = civil works, E =equipment. Highlighted contracts will be procured by advance contracting and retroactive financing.

6. Goods and Works Contracts Estimated to Cost Less than $100,000

6. The following table groups smaller-value goods, works and consulting services contracts for which procurement capacity is expected to commence within the next 18 months.

Table A9.7: Goods and Works Contracts Estimated to Cost Less than $100,000 Contract Procurement Expected Date of General Description Value ADB Review Method Advertisement ($ million) Goods Fuling District Office equipment and T-FL-E01 0.03 Shopping Jan 2011 Post vehicle Road maintenance T-FL-E02 0.08 Shopping Jan 2012 Post equipment Qianjiang District T-QJ-E01 Office equipment and 0.06 Shopping Feb 2010 Post

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Contract Procurement Expected Date of General Description Value ADB Review Method Advertisement ($ million) vehicle Road maintenance T-QJ-E02 0.09 Shopping Jan 2012 Post equipment Youyang County T-YoY-E01 Office equipment 0.009 Shopping Dec 2010 Post Road maintenance T-YoY-E02 0.05 Shopping Jan 2012 Post equipment W-YoY-E02 Office equipment 0.006 Shopping Apr 2010 Post Xiushan County Office equipment and T-XS-E02 0.07 Shopping Sep 2010 Post vehicle Yunyang County Office equipment and T-YuY-E02 0.07 Shopping Oct 2010 Post vehicle W-YuY-E02 Office equipment 0.007 Shopping Sep 2011 Post Fengjie County Office equipment and T-FJ-E02 0.10 Shopping Sep 2010 Post vehicle W-FJ-E02 Office equipment 0.005 Shopping Sep 2011 Post Wushan County Office equipment and T-WS-E02 0.09 Shopping Sep 2010 Post vehicle W-WS-E02 Office equipment 0.001 Shopping Sep 2011 Post Chengkou County Office equipment and T-CK-E02 0.05 Shopping Sep 2010 Post vehicle W-CK-E02 Office equipment 0.0009 Shopping Sep 2010 Post NCB = national competitive bidding. First column is reference number: T = traffic civil works, E=equipment. Highlighted contracts will be procured by advance contracting and retroactive financing.

B. Section 2: Project Procurement Plan

7. Indicative List of Packages Required Under the Project

7. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the Project.

Table A9.8: Indicative List of Packages Required Under the Project ($ million) Estimated Estimated Domestic General Procurement Value Number of Preference Comments Description Method (cumulative) Contracts Applicable Goods 0.72 16 Shopping No 3.68 10 NCB No Works 143.43 25 NCB, Shopping No Consulting services for Consulting 0.078 1 ICS Yes project start-up Services activities Includes consulting Consulting services, training, Services and 2.722 1 QCBS No study tours, and Capacity Building project implementation equipment ICB = international competitive bidding, ICS = individual consultant selection, NCB = national competitive bidding, QCBS = quality- and cost-based selection, S = shopping.

C. Section 3: National Competitive Bidding for PRC

8. The Borrower’s Law of Tendering and Bidding of the People’s Republic of China promulgated by Order No. 21 of the President of the People’s Republic of China on 30 August 1999 are subject to the following clarifications required for compliance with the Guidelines:

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

(i) All invitations to prequalify or to bid shall be advertised in the national press, or official gazette, or a free and open access website in the Borrower’s country. Such advertisement shall be made in sufficient time for prospective bidders to obtain prequalification or bidding documents and prepare and submit their responses. In any event, a minimum preparation period of thirty (30) days shall be given. The preparation period shall count (a) from the date of advertisement, or (b) when the documents are available for issue, whichever date is later. The advertisement and the prequalification and bidding documents shall specify the deadline for such submission. (ii) Qualification requirements of bidders and the method of evaluating the qualification of each bidder shall be specified in detail in the bidding documents, and in the prequalification documents if the bidding is preceded by a prequalification process. (iii) If bidding is preceded by a prequalification process, all bidders that meet the qualification criteria set out in the prequalification document shall be allowed to bid and there shall be no limit on the number of pre-qualified bidders. (iv) All bidders shall be required to provide a performance security in an amount sufficient to protect the Borrower/Project Executing Agency in case of breach of contract by the contractor, and the bidding documents shall specify the required form and amount of such performance security. (v) Bidders shall be allowed to submit bids by mail or by hand. (vi) All bids shall be opened in public; all bidders shall be afforded an opportunity to be present (either in person or through their representatives) at the time of bid opening, but bidders shall not be required to be present at the bid opening. (vii) All bid evaluation criteria shall be disclosed in the bidding documents and quantified in monetary terns or expressed in the form of pass/fail requirements. (viii) No bid may be rejected solely on the basis that the bid price falls outside any standard contract estimate, or margin or bracket of average bids established by the Borrower/Project Executing Agency. (ix) Each contract shall be awarded to the lowest evaluated responsive bidder, that is, the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (a) to be substantially responsive to the bidding documents and (b) to offer the lowest evaluated cost. The winning bidder shall not be required, as a condition of award, to undertake responsibilities for work not stipulated in the bidding documents or otherwise to modify the bid as originally submitted. (x) Each contract financed with the proceeds of the Loan shall provide that the suppliers and contractors shall permit ADB, at its request, to inspect their accounts and records relating to the performance of the contract and to have said accounts and records audited by auditors appointed by ADB. (xi) Government owned enterprises in the Borrower’s country may be permitted to bid if they can establish that they (a) are legally and financially autonomous, (b) operate under commercial law and (c) are not a dependent agency of the Borrower/Project Executing Agency. (xii) Re-bidding shall not be allowed solely because the number of bids is less than three (3).

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 10 SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: PRC: Chongqing Urban-Rural Infrastructure Development Demonstration Project Lending/Financing Modality: Loan Department/Division: EARD/EASS I. POVERTY ANALYSIS AND STRATEGY A. Link to the National Poverty Reduction Strategy and Country Partnership Strategy Chongqing Municipality suffers from regional disparities between the less developed southeast and northeast regions and the area known as the one hour economic circle (OHEC), districts within a one-hour driving time of Chongqing City. The OHEC accounts for 60% of the population, 78% of GDP and has a poverty rate of 5.3%. In contrast, the northeast comprises a third of the population, accounts for 17% of GDP and has a poverty rate of 9% while the southeast lags farther behind, accounting for 11% of the population with a poverty rate of 12% and contributing 5% of GDP. One of the driving forces behind the Chongqing Urban-Rural Infrastructure Development Demonstration Project (the Project) is to reduce the developmental disparities between the OHEC and northeast and southeast, by addressing development challenges resulting from inadequate infrastructure in eight of the poorest districts and counties in the Municipality. The Project will improve road (21 sub-components) and water supply infrastructure (nine sub-components) accompanied by sanitation and wastewater management improvements (implemented by Chongqing Municipal Government [CMG]) and training in sanitation and hygiene awareness, resulting in improved access and mobility, protection of drinking water sources, provision of clean and stable water supplies, and wastewater management in eight poverty districts and counties: Fuling, Qianjiang, Youyang, Xiushan, Yunyang, Fengjie, Wushan, and Chengkou.

The Project will be a pilot for integrated urban and rural infrastructure development to create more balanced development and narrow the urban–rural economic gap by addressing problems stemming from poor road infrastructure which restricts access within and between towns, and the lack of a clean and reliable water supply which inhibits economic growth. The Project is in line with the PRC poverty reduction strategy for development of the western region, which seeks to decrease the gaps created by eastern PRC’s rapid economic development and supports the government’s development vision of maintaining high rates of growth, but channeling it towards poverty reduction and reducing disparities.

The Project is in line with ADB’s Country Partnership Strategy with the PRC to make markets work more efficiently through (i) urban infrastructure development, (ii) promotion of environmental sustainability, and (iii) pro- poor equitable and inclusive growth. The Project is also consistent with the Government’s priorities in the 11 FYP of addressing environmental issues including water and air pollution. Furthermore, the Project is consistent with ADB’s water policy that people must have access to safe and reliable water supplies and it will help the PRC achieve the Millennium Development Goal of environmental sustainability (MDG Target 7), and specifically address MDG Target 10 (to halve the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015). B. Poverty Analysis Targeting Classification: MDG-TI 1. Key Issues Chongqing ranks as the 11th poorest province or municipality in PRC. As of 2008, the total poverty rate in Chongqing is 5.3%, and with an official poverty line of CNY1,196 ($176) per person per year equates to 1.42 million poor people. All sub-components are poverty districts and counties: the Project Area includes half of Chongqing’s national poverty districts and counties and one of four municipal poverty districts (Fuling). Approximately half (49%) of the poor population in Chongqing are concentrated in the eight Project districts and counties. The Project will improve infrastructure in 36 towns and 127 villages, including 22 poverty villages (14 of which are in ethnic minority areas). In total some 40% of project beneficiaries are in three of the six poorest counties in the Municipality (Wushan, Chengkou and Youyang). Some 12.4% of all project beneficiaries are poor. Residents in the villages and towns in the sub-component areas suffer from (i) poor access which stifles economic and social activity; and (ii) non-existent or inadequate water supply and poor sanitary and living conditions. The total number of beneficiaries is in the order of 377,000. Beneficiaries of sub-components in Chengkou, Fengjie, Wushan and Yunyang include 16,000 people who will receive benefits from both roads and water supply (of whom 1,900 are poor).

The household survey found that in the dry season, 81% of the lowest income quintile compared with 67% of highest income quintile use an unimproved natural source for drinking water, and that twice as many households in the highest income quintile (15%) compared with 8% of households in the lowest income quintile have access to improved drinking water sources (such as tube-wells with pumps). This shows that a large proportion of low- income families are exposed to possibility of being affected by WBIs, and that while exposure to WBIs is a risk for all households, it disproportionately affects the poor.

Children from the lowest income quintile households have further to travel to school than children from non-poor households (the highest income quintile). Children from nearly a third of the highest income quintile households travel 1 km or less to primary school compared with children from 18% of households in the lowest income quintile, while a high proportion of the lowest income quintile children (70% of households) compared with children from 42% of the highest income households travel 4 km or more to secondary school. The 21 road sub-

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report components, amongst other things such as improving linkages with markets and towns, will improve access to schools and provide a safer environment (signs and speed restrictions) for children traveling to school.

Overall, the analysis concludes that the poor are mostly living in the areas without running water supplies, wastewater or sanitation, or all-weather access. They often suffer from serious water supply shortages, poor water quality, wastewater pollution, poor environmental sanitation, and access and mobility impediments. They have less capacity to cope with the pollution and degraded environments and in turn suffer from increased exposure and risks to surface and ground water pollution, which further add to their poverty situation. Through the improved roads, provision of clean and stable water supply and wastewater management, and integrated environmental health and hygiene components in the sub-components, the Project will improve the living environment and health status of the beneficiaries. 2. Design Features Project assurances call for employment of local labor, especially vulnerable groups, ethnic minorities, and women. The social action plan (SAP), gender action plan (GAP) and ethnic minority development plan (EMDP) outline strategies for mitigating adverse impacts and promoting positive benefits such as employment, pilot demonstration of environmental and health awareness training and school water and sanitation upgrading, HIV/AIDS awareness training for contractors and public awareness on water tariffs. The Project incorporates several strategies to facilitate the ability of households and communities to realize benefits from the road, water supply, and sanitation improvements and, thereby, contribute to poverty reduction in the Project Area. II. SOCIAL ANALYSIS AND STRATEGY A. Findings of Social Analysis

Water supply sub-components: The survey showed that all of the households that are connected to the water supply stated they paid additional amounts to buy filters and sterilizing tablets to treat tap water prior to drinking. These households receive inadequate water for their basic living needs and need to augment the supply with collection of water from other sources. Along with non-connected households, two-thirds of all households in the wet season and three-quarters of all households in the dry season make use of natural resources, such as streams, rivers or ponds; this leads to high risks of contracting WBIs, the household survey showing that 31% of households included members who had suffered a WBI in the past 12 months. The Project will result in tangible and positive impacts in terms of health benefits as a result of prevention in the incidence of WBIs; this will in turn lead to households spending less on medical treatments and incurring fewer sick days, leading to “savings” of potentially lost income. A public environmental health and hygiene awareness program will be piloted in two sub- components and will be accompanied by improvements to sanitation facilities in selected schools.

Road sub-components: Walking is the predominant mode of transport, regardless of trip purpose, followed by trips on motorbike. Overall 20% to 30% of households stated they were regularly unable to reach important facilities and services (health centers, markets and schools) as a result of road closures due to flooding, landslides or mud-flows. Focus group discussions in the villages stressed that the lack of bridges or river crossings at strategic locations exacerbates access difficulties. This requires people to cross the rivers, which is highly dangerous in high-flow situations. In some cases this has resulted in people being swept away and seriously injured and even drowned. Due to lack of river crossings, ambulances are restricted during emergency or accident situations. People requiring access to market for agricultural products and emergency access to health services will experience immediate benefits. The road improvements include provision or reconstruction of bridges and river crossings, the lack of which currently severs access during the rainy season. In the longer-term, the public sector will be better able to provide services to the population. This includes health and education services for which current access is insufficient and inadequate and those presently not available such as access to government services and infrastructure like electricity/water supply and veterinary extension services. It is anticipated that the agricultural and local/community business sector will grow, with new micro, small and medium enterprises being established that will take advantage of better transport services and lower transport costs to operate and provide services.

Employment Benefits: The Project will create direct short-term employment during the Project construction phase and long-term employment opportunities during the operation phase (maintenance). A target that the poor and women will fill 30% of short-term employment opportunities during the construction phase will be adopted. Over the five year project period, this would equate to generation of 1,063,800 days of work for the road sub- components (jobs for 2,914 people) and of 82,131 days of work for the water supply sub-components (jobs for 225 people). Provided that the target for the poor and vulnerable can be achieved (30%) this would mean that 707 poor people could find employment with the Project (or a total of 257,834 work days can be allocated to the poor). Assuming local labor can fill three-quarters of the jobs, in terms of wages generated by direct employment, the road sub-components can provide CNY34.4 million ($5 million) to local laborers and CNY10.3 million ($1.5 million) generated as wages for the poor. For the water supply sub-components, local laborers will earn CNY2.65 million ($390,877); this in turn can provide CNY797,389 ($117,263) to poor households.

Ethnic Minority Issues: Ethnic minority people – Tujia and Miao – represent the majority population in three districts/counties (Qianjiang, Youyang and Xiushan). The ethnic minority counties are located in the southeast and suffer access and infrastructure difficulties and are among the poorest in the Project Area. The Tujia are also the majority population in one autonomous town in Yunyang. An EMDP has been prepared to mitigate adverse impacts on ethnic minority beneficiaries and to ensure that the Tujia and Miao can receive the same benefits as the Han.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Project Risks: Risks associated with resettlement and land/asset acquisition will be mitigated through implementation of the resettlement plans. The risk of spread of sexually transmitted infections (STIs) and Human Immune-deficiency Virus (HIV) associated with the construction phase of the Project (presence of a large construction workforce) will be mitigated through the implementation of an awareness and prevention program for (i) construction workforce to be implemented by contractors (with assistance of an NGO); and (ii) communities.

Benefits: Overall the benefits of the Project include: (i) improvement of existing road and water supply infrastructure; (ii) improved access and mobility, providing easier and safer travel to economic and social facilities and services (markets, schools, and health clinics), and non-farm based employment opportunities; (iii) addressing water shortage problems and poor water quality in selected towns, improving the health of the local population and reducing productivity losses associated with WBIs; (iv) reduction in time spent by women collecting water; (v) employment opportunities during sub-component construction, operation, and ongoing and routine maintenance; (vi) contribution to local poverty reduction; and (vii) contribution to local economic development and reduction in the developmental gap between urban and rural areas, and promotion of integrated and balanced urban-rural development.

B. Consultation and Participation

1. Provide a summary of the consultation and participation process during the project preparation. The PPTA used various participatory methods and approaches for the poverty and social impact assessment, including 831 respondents randomly sampled for the socio-economic survey (in the eight components), stakeholder consultation workshops, focus group discussions, and key informant interviews on issues related to water supply, wastewater management, solid waste management, and integrated urban environmental improvements. The development of the initial environmental examination (IEE) and resettlement plans (RPs) and the ethnic minority development plan (EMDP) have also involved rounds of public consultation.

2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment

3. Was a C&P plan prepared? Yes No Public disclosure of all project documents will be undertaken through the implementing agency and on the ADB website including the project information document (PID), Design and Monitoring Framework, Summary EIA, RPs, and EMDP, and the Report and Recommendation of the President (RRP). Disclosure of social and environmental monitoring reports will be undertaken during Project implementation.

Consultations with communities will take place at different points in the preparation and implementation of the EMDP, GAP and SAP within the sub-components, and will be designed not only to inform people about the sub- component or specific activities related to its preparation and implementation, but also to enable people in the community to ask questions, make suggestions, state preferences and express concerns. Special attention will be paid to the participation of women and any other vulnerable groups, such as the poor. The project demonstration activities of environmental, health and sanitation awareness and public awareness on water tariffs will employ participatory strategies to ensure full community involvement.

C. Gender and Development

1. Key Issues Similar proportions of females and males have completed both primary and secondary education, a higher proportion of males (11%) compared with females (8%) attained a tertiary education while a significantly higher proportion of females (22%) compared with males (6%) said they had not received any formal education. Migration for labor is a very important source of income for households, while both females and males migrate 61% of females and 75% of males migrate for 7 months or more per year, 39% of females compared with 23% of males migrate for 4-6 months. A higher proportion of females than males are engaged in unpaid activities and for longer hours. More than half of 18-64 year old females (53%) compared with 35% of males undertake unpaid activities for between 6 and 12 hours per day, and 15% of 5-17 year old females compared with 12% of males also engage in unpaid work.

The PSA indicates that women strongly support the water supply sub-components included in the Project across all of the sub-components; (i) women are more dissatisfied with the quality and quantity of water received (twice as many female headed households (19%) compared with 8% of male headed households stated they could not drink the water from the tap without boiling or treating it first); and (ii) while the rate of WBIs such as gastro- enteritis, dysentery or diarrhea is similar between males and females, a significantly higher proportion of females (65%) compared with males (35%) have suffered typhoid or para-typhoid. Women will clearly benefit from the Project; water supply sub-components will improve health, and increase water availability for their households’ basic living needs, reducing time spent on water collection.

Women will also anticipate benefits from road sub-components. For all trip purposes/destinations together a higher proportion of females (76%) than males (70%) walk. Males travel by motorbike more than females, regardless of trip purpose. A much larger proportion of female students (9%) compared with males students (less than 1%) use the bus, and more male students (10%) travel to school by pick-up or van than female students (1%).

Women have perceived that the Project will improve their living environments, improve access and mobility, create employment opportunities, and reduce the incidence of WBI and their associated costs and adverse

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report impacts. Gender issues have been mainstreamed in the analysis and consultation undertaken for the Project and have been incorporated into the design of the Project. In particular a sanitation and hygiene awareness program has been designed to address a number of concerns and issues raised by women during the consultations. The gender assessment included in the PSA concluded that women will be beneficiaries of the Project and that the Project has the potential to create gender specific outcomes as a result of more general social benefits that could be derived from improved roads (access and mobility) and water supply (with sanitation). Women may experience potential adverse social impacts including increased exposure to communicable diseases. This risk will be mitigated through the HIV/AIDS/STIs awareness and prevention campaign to be implemented by the Project. A GAP has been prepared for the Project and gender specific parameters have been included in the Project’s monitoring framework to ensure that targets are met, women fully participate in, and enjoy Project benefits and adverse effects upon women are avoided or mitigated. 2. Key Actions Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services, resources, assets, or opportunities and participation in decision-making process, and training: Gender plan Other actions/measures No action/measure

Gender has been mainstreamed into the design of the Project, including a range of gender-sensitive measures, requirements for consultation, training, and monitoring indicators. The IAs will work with Women’s Federations, contractors and communities to facilitate the participation of women in paid work opportunities for physical works; and, ensure that all PRC labor laws and core labor standards are respected. HIV/AIDS/STIs awareness and prevention programs will target women as well as men, including the programs instituted by contractors to reach construction crew. Project assurances (i) prioritize women for employment, including a 30% target for project employment opportunities for women, the poor and ethnic minorities during the construction phase; (ii) ensure gender dis-aggregated baseline and survey data will be collected; (iii) ensure implementation of the Project’s GAP; and (iv) ensure targets and GAP implementation will be monitored. III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Issue Significant/Limited/No Impact Strategy to Address Issue Plan or Other Measures Included in Design Involuntary Resettlement impacts will be Resettlement plans are prepared for Plan Resettlement created in each of the sub- the thirty sub-component areas. Res. components, for a number of the Framework road and water supply sub- No Action components. Indigenous Three sub-component An EMDP has been prepared for the Plan Peoples components are located in ethnic Project. No adverse impacts Other Action minority areas (Tujia and Miao); particularly affecting ethnic minorities IP Framework appropriate consultation are anticipated. No Action mechanisms and measures to ensure benefits for ethnic minority people are required. Labor The Project endorses the Core labor standards will be Plan Employment principle of recruitment of local implemented. Civil works contracts will Other Action opportunities people for physical works stipulate priorities to (i) employ local No Action Labor (upgrading and rehabilitation of people for works, (ii) ensure equal retrenchment roads and water supply). opportunities for women and men, (iii) Core labor pay equal wages for work of equal standards value, and to pay women’s wages directly to them; and (iv) not employ child or forced labor. Specific targets for employment have been included in the GAP. Affordability The Project’s affordability The proposed tariffs are affordable by No Action analysis concludes that proposed the poor and will allow cost recovery. tariffs and monthly water bills are A public awareness program on tariff affordable; representing 1.5% to reform will be piloted during project 1.8% of average monthly implementation and support the household income and 1.4% to existing process of public consultation 1.8% of lowest monthly for tariff reform in PRC. household income. Other Risks The level of knowledge of HIV The Project will reduce exposure to Plan and/or risks and transmission is low. the risk in two ways: (i) civil works Other Action Vulnerabilities There is also the small risk contractors required to engage No Action HIV/AIDS associated with construction qualified agency to raise awareness of Human workforce during the physical HIV/AIDS/STIs for construction trafficking works phase of the Project. workers; (ii) the SAP outlines how the

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Others Project can cooperate with local health bureaus in the districts and counties to ensure that existing HIV/AIDS awareness activities are extended to communities in the Project areas. IV. MONITORING AND EVALUATION Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No The long-term social monitoring study will document benefits for women related to road improvements and ongoing road maintenance. Gender-sensitive monitoring indicators have been included in the Project’s monitoring framework.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 11 SUMMARY GENDER ACTION PLAN

Activity Indicators and Targets Responsibility Time 1. Physical works and infrastructure improvements in roads, water supply, wastewater/sanitation42 Consultation and socialization of the At least 40% of participants in CMG, IAs, PIC, 2010– Project in the community: consultation and socialization District/county 2016 Ensure: balanced representation of both activities are women; or village level genders in all consultation and socialization Separate consultation and WF (to assist forums; socialization meetings with women in facilitation of female representation of decision-making the community; meetings) bodies; Number of female members of effective participation of women in all bureaus and committees; activities conducted in the communities. Records of meetings and Organize separate consultations with and consultations dis-aggregated by sex create opportunities for them to voice and age opinions, needs and preferences. Water supply and road sub-components: Gender dis-aggregation, where CMG, IAs, PIC, 2010– Ensure gender sensitive approach is taken in required, in affordability analysis and WRB, TB, HB, 2016 analyzing affordability and tariff setting; incorporation into Project and EPB Improved health and hygiene awareness for component reporting; women; HB and EPB statistics; Monitor levels of satisfaction of water quantity TB statistics; and quality; public satisfaction with the urban- Annual sex dis-aggregated rural environment and provision of road socioeconomic surveys undertaken transport; as part of the PPMS; Monitor number of hours and reduction in Sex dis-aggregated baseline data time spent by women and children collecting and follow up surveys; water; MSC monitoring to identify differential Monitor health impacts on women, focusing impacts and levels of satisfaction on reduction in WBIs; between women and men Ensure gender analysis of access constraints and affordability of public transportation services; Improved access to markets, employment opportunities and key social services for women Promote the creation of job and livelihood 30% participation of women and poor CMG, IAs, PIC, 2011– opportunities for women during construction Equal payment received by male and TB, contractor 2015 phase of Project; female workers who undertake work Conducive work environments for of equal value; Number of women participation of women; who are leaders of construction Separate awareness training provided for crews; men and women on health and safety and Training records (to be dis- HIV/AIDS and STIs during workforce aggregated by sex, income status, mobilization; age and ethnicity); Appropriate contract clauses, specifications Wage bills, contract staff/labor and conditions. records (dis-aggregated by sex, income status, age and ethnicity) 1.1 GAP Activities in Water Supply and Road Sub-components Collection of gender dis-aggregated baseline Annual sex dis-aggregated socio- CMG, IAs, PIC, 2010– and follow-up surveys in five sub-components economic surveys undertaken; WRB, TB 2016 and monitor and evaluate trends; Dis-aggregated baseline and other Ensure inclusion of GAP issues in socio- information; economic profiles of sub-components Gender aspects of socio-economic issues incorporated into Project and component reporting Female leaders participation consultations At least 30% of are female leaders or CMG, IAs, PIC, 2010– and workshops conducted to discuss road representatives of women’s interest WRB, leaders 2016 safety, water supply and sanitation issues organizations (WF and NGOs) of local and plans etc; government Improved women’s representation and agencies and participation in sectors as well as policy organizations dialogue to increase women’s participation in

42 CMG will provide improvements to wastewater management and sanitation facilities in parallel to water supply improvements under the Project.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Activity Indicators and Targets Responsibility Time this sector Women and girls participation in WatSan and Number of communities/schools CMG, IAs, PIC, 2010– road and traffic safety training in communities covered and trainings provided; WRB, TB, 2013 and schools Training records (to be dis- Traffic Police aggregated by sex, income status, age and ethnicity) 1.2 GAP Activities in Environmental Health, Sanitation and Hygiene Awareness and Training Component As part of PDA/GAP – hygiene and sanitation Compliance with Project assurances; CMG, IAs, PIC, 2011– awareness baseline conducted and training Training records (to be dis- WF, WRB, 2013 program implemented in two counties; aggregated by sex, income status, NGOs, Pilot, school WatSan program implemented; age and ethnicity); specialists as Inclusion of WF as a key Project stakeholder; Implementation, reporting and required monitoring of PDA; (identified Dis-aggregated baseline (including through information on WBIs) and other support of WF) information; Number of women receiving training; Number of training sessions provided in schools; Number of segregated toilet and hand-washing facilities provided; Number of training and IEC materials provided; Evidence of training materials that target girls Ensure women are represented in hygiene At least 30% of hygiene promotion CMG, IAs, PIC, 2011– promotion teams to carry out training and team members are women WF, WRB, 2012 awareness activities in communities and NGOs, schools 2. Management Improvement and Capacity Building Gender awareness training and assistance Number of participants(to be dis- CMG, IAs, PIC 2010– for CMG and: Identification of gender issues aggregated by sex); 2011 incorporation into plans development Gender issues reflected and strategies mainstreamed in planning documents Capacity building of CMG and IAs: Specific gender trainings are CMG, IAs, PIC 2010– Provide gender equality briefing for developed by PIC social/gender 2011 consultants and community facilitators to specialists; improve implementation of the GAP Number of staff responsible for All gender related training programs are gender assessed on content prior to delivery. Training records (dis-aggregated by sex, job description, and age). 3. Project Management Ensure staff allocated to positions/roles Number of staff allocated for CMG, IAs, PIC 2010– responsible for social/gender issues in CMG social/gender analysis tasks and 2011 and IAs; activities, GAP and SAP Ensure gender balanced composition (and implementation; equal pay) in CMG and IAs; Wage bills, dis-aggregated by sex, PIC to include social/gender specialists in job description and age; team Number of social/gender specialists on PIC team and months allocated positions on team Monitoring and evaluation undertaken as Compliance with Project assurances; CMG, IAs, PIC 2010– per DMF and PPMS: Incorporation of GAP and SAP 2016 Collect gender disaggregated data on gender indicators in PPMS and DMF, stakeholders’ participation in trainings and implementation of PPMS and DMF; community activities (planning, Gender disaggregated data is implementation, and O&M) in baseline and collected in baseline and completion completion surveys. surveys. Provide training for the community facilitators Number of trained community to collect gender disaggregated data in those facilitators to collect gender surveys. disaggregated data; Ensure that gender disaggregated data Gender disaggregated data is collected is properly analyzed and the included in Project progress reports; analysis is included in the project progress Field visits and regular supervision reports. for community facilitators are Project gender specialists regularly conduct conducted and reported.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Activity Indicators and Targets Responsibility Time field visits, review progress in gender mainstreaming, and supervise community facilitators. AIDS = acquired immunity deficiency syndrome, CMG = Chongqing Municipal Government, DMF = design and monitoring framework, EPB = environmental protection bureau, GAP = gender action plan, HB = health bureau, HIV = human immunodeficiency virus, IA = implementing agency, IEC = information, education and communication, MSC = most significant change, NGO = nongovernment organization, O&M = operation and maintenance, PDA = pilot demonstration activity, PIC = project implementation consultant, PPMS = project performance management system, SAP = social action plan, STI = sexually transmitted infection, TB = Transport Bureau, WatSan = water and sanitation, WBI = waterborne infection, WF = Women’s Federation, WRB = Water Resources Bureau.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 12 SUMMARY RESETTLEMENT PLAN

A. Background

1. The Project supports investment in eight poverty district and counties of Chongqing Municipality providing urgently needed for roads and water supply infrastructure and improved environmental management. In total, the Project includes 30 individual road and water supply sub-components within the eight poverty district and counties. The construction of all sub-components requires some land acquisition and population resettlement. Based on the extent of the impacts, eight full resettlement plans have been prepared for the road sub- components and five short resettlement plans for the water supply sub-components. The resettlement planning and implementation is designed to ensure that the affected persons (APs) will be better-off or at least not worse-off as a result of the Project.

B. Resettlement Impacts

2. In total, the Project will acquire about 163.3 hectares (ha) of land, of which 80.2 ha is classified as cultivated land. It also requires the temporary occupation of 43.1 ha of land, of which one-third is farmland. A total of 37,149.6 square meters (m2) of residential houses will be demolished. Land acquisition will affect 4,238 households and 17,456 APs. House demolition will adversely impact 341 households and 1,387 APs. In total 4,387 households and 18,004 APs will be affected in the eight poverty district and counties. Among them 192 households with 839 APs will lose both land and structures and/or houses. The impacts of the Project are summarized in Table A12.

Table A12: Summary of Land Acquisition and Resettlement Impacts Permanent Temporary Of which House Affected Project Sub- Land Land Affected No. Cultivated Relocation Households components Acquisition Occupation 2 Persons (ha) (m ) (HH) (ha) (ha) 1 Xiushan Roads 18.1 6.0 4.0 9,127 665 2,742 2 Youyang Roads 13.8 7.9 1.4 1,650 205 872 3 Youyang Water 2.1 0.0 7.5 0 8 41 Qianjiang 4 7.3 6.0 4.2 0 261 1,161 Roads 5 Fuling Roads 16.9 5.7 1.7 2,830 438 1,339 Yunyang 6 13.8 11.8 1.9 0 584 2,662 Roads 7 Yunyang Water 0.9 0.6 2.6 0 16 78 8 Fengjie Roads 54.6 17.6 9.8 7,047 1,329 5,347 9 Fengjie Water 0.5 0.3 1.0 0 10 41 10 Wushan Roads 12.2 8.5 4.0 5,416.2 224 897 11 Wushan Water 0.6 0.4 0.4 0 10 62 Chengkou 12 22.1 15.0 4.0 11,079 629 2,735 Roads Chengkou 13 0.3 0.3 0.6 0 8 27 Water Total 163.3 80.2 43.1 37,149.6 4,387 18,004 ha = hectare, m2 = square meter, RP = resettlement plan.

C. Policy and Legal Framework

3. Compensation for permanent land loss is based on the Land Administration Law of PRC (2004) and the State Council Decision to Deepen Reform and Strictly Enforce Land Administration (Document 28 dated November 2004 and Regulation on Land Administration in Chongqing, the circular from the People's Government of Chongqing Municipality on Issues Regarding adjusting the Policy of Land Acquisition Compensation and Resettlement (YFF [2008] 45)). House demolition is based on the Chongqing Municipal Housing

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report Demolition Administration Regulations. The prepared resettlement plans comply with PRC laws and regulations of resettlement and ADB’s Policy on Involuntary Resettlement (1995). The resettlement principles established for the Project are: (i) land acquisition and involuntary resettlement should be avoided or minimized where feasible by developing and comparing a series of design alternatives; (ii) compensation and entitlements provided are based at replacement costs and must be adequate to allow those affected to at least maintain their pre-project standard of living, with the prospect of improvement; (iii) the land temporarily occupied and the period of disruption are to be kept to a minimum; (iv) all APs, legal and illegal, are to be taken into consideration and accounted for; (v) the per capita landholding after land acquisition will be sufficient to maintain the previous livelihood standards; (vi) where land allocation per capita is not sufficient to maintain the previous livelihood standards, other income-generating activities will be provided for; (vii) a preferential policy will be provided to vulnerable groups in such things as compensation, payment of special fund, minimum living guarantee, and employment; (viii) all APs will be adequately informed about eligibility, compensation rates and standards, livelihood and income restoration plans, and project timing; and (ix) close monitoring and timely actions will be carried out to identify and resolve any problems.

D. Compensation Standard, Income, and Livelihood Restoration Scheme

5. The land acquisition and resettlement compensation standards will follow the Regulation on Land Administration in Chongqing, the circular from the People's Government of Chongqing Municipality on Issues Regarding adjusting the Policy of Land Acquisition, Compensation and Resettlement (YFF [2008] 45) and ADB's Policy on Involuntary Resettlement. For the rural farmers suffering land loss but not getting urbanized – two options will be offered: (i) land for land of equivalent quantity and quality or (ii) cash compensation at replacement costs, compensation for crops and cash or kind support based on the willingness of APs for livelihood restoration. Based on PRC regulation about 1,539 APs will get an opportunity to become urban residents; the regulation prescribes a formula for calculation of the number of APs who can be urbanized. For APs choosing to be urban residents, 80% of the land compensation fee will be used to arrange the basic endowment insurance paid directly to the Labor Insurance Department.

6. The urbanized farmers will also get a resettlement subsidy of CNY26,000 ($3,824) per capita and they would contribute the amount (CNY20,500, i.e. 3,015) as 50% of the endowment insurance fund (CNY41,000, i.e. $6,029) and the remaining amount (CNY5,500, i.e. $809) will be used for income restoration. Compensation for standing crops, auxiliaries, and other assets will also be paid directly to the APs. For people losing housing in rural areas, there are two resettlement options: to receive cash compensation or cash compensation plus provision of house plots for house construction by APs themselves. Assistance will be provided to construct new houses or find available housing close to their original homes, if that is their preference. The respective district and county PMOs, IUs, and local town and township governments will provide necessary assistance for house construction and relocation during resettlement implementation. The measures for economic rehabilitation include: (i) provision of employment opportunities during the project construction and operational phases, (ii) development of economic crops with higher economic value, (iii) promotion and development of new enterprises and self-employed secondary and tertiary businesses, and (vi) provision of technical training to the APs to improve their skills for other livelihood opportunities.

E. Information Disclosure, Participation, and Grievances

5. All of the affected households and villages, village leaders and town and township and district and county governments have been involved in the project impact and social- economic survey. On various occasions during meetings, interviews, focus group discussions, public consultation workshops, and community consultation meetings, local representatives have participated in the planning and concerns have been integrated into the RPs. Before implementation, the CPMO, district and county governments, implementing

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report units and village leaders will further discuss and consult with the APs’ representatives the impacts on every village and the detailed compensation plan to ensure APs’ interests are protected and to provide employment opportunities for the APs’ livelihoods as a result of Project implementation. CPMO and district and county governments will disclose the resettlement plans in district and county and village offices and to affected people in the local language. The RPs will also be posted on the ADB website. Resettlement information booklets will also be distributed to affected households by January 2010. This guide shall contain information such as the affected project area, proposed land acquisition and relocation implementation progress and procedure, compensation standards for land acquisition, relocation assistance and livelihood restoration strategy. The respective sub- component implementing units will establish project resettlement units for supervision of implementation, continued public consultation, monitoring of progress, and response to grievances. The grievance address procedures will be established and explanations will be included in the resettlement information booklets.

F. Implementation Arrangement and Schedule

6. Each PMO and implementing unit will have at least two full-time staff responsible for land acquisition and resettlement respectively. The staff from each sub-component resettlement unit will take the lead responsibility for coordinating the planning, implementation, financing, and monitoring of land acquisition and resettlement. They will work closely with relevant village officials, land administration bureaus and house demolition offices, and will be responsible for supervision and monitoring of resettlement (e.g. delivery of entitlements, selection of new housing sites, restoration of incomes, provision of replacement land, and other economic measures). A training program will be organized for the resettlement officers. Resettlement plans will be updated based on final design and detailed measurement survey and sent to ADB for review and approval prior to award of civil works contracts. All compensation and resettlement assistances will be paid to affected households prior to commencement of construction activities. The land acquisition and house demolition will commence from June 2010.

G. Resettlement Cost and Fund Management

7. The cost estimate for land acquisition and resettlement for the eight components is equivalent to CNY139.73 million or $20.6 million in November 2009 prices, including contingencies. Resettlement implementation will be scheduled to precede the sub- component construction schedules. Resettlement implementation will be completed prior to sub-component construction. The implementing units and the district and county governments will ensure that such funds are made available on a timely manner.

H. Monitoring and Evaluation

8. Internal and external monitoring of RP implementation will be conducted. Monitoring methodologies are specified in the RPs. Each implementing unit will carry out internal supervision and monitoring to ensure compliance with the provisions of the RP. The PMO and implementing units have agreed to a set of supervision milestones with ADB, to ensure timely and effective implementation of resettlement activities. An independent agency under contract to the CPMO will implement external monitoring and evaluation. Semiannual external monitoring reports will be forwarded directly to both the PMO and ADB.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 13 SUMMARY FINANCIAL ANALYSIS

A. Water Sector Analysis

1. Existing Urban and Rural Water Supply Systems. A study of main town (urban center) and rural water supply systems was conducted for the five counties to identify the financial issues and potential reforms for the sector. The financial performance of water supply systems varies based on technical configuration and service areas served. Chengkou, Fengjie and Wushan urban water supply systems incur operating losses and subsidized by their respective county finance bureaus. Urban water supply companies levy a wastewater fee, which ranges from CNY0.4 ($0.059) to CNY0.5 ($0.074) per m3 for domestic customers and CNY0.4 ($0.059) to CNY0.9 ($0.132) per m3 for non-domestic customers. Rural towns’ water supply companies do not charge wastewater fee. Water consumption is predominantly domestic in rural towns. Domestic tariffs for rural water supply range from CNY1.20 ($0.176) in Chengkou to CNY2.62 ($0.385) per m3 in Yunyang while non-domestic tariffs range from CNY1.20 ($0.176) per m3 to CNY3.49 ($0.513) per m3. Chengkou has the highest service coverage at 40% of rural town population and the four counties' coverage ranges from 15% (Wushan), 20% (Youyang and Yunyang) and to 25% (Fengjie) of the county rural towns. Supplementary Appendix O sets out the detailed water sector assessment of urban and rural water supply systems.

B. Financial Analysis of Water Supply Sub-components

2. The financial analysis of the proposed water supply sub-components has been carried out in accordance with ADB’s Financial Management and Analysis of Projects.43 All financial costs and benefits were expressed in constant November 2009 price levels. Cost streams in the financial internal rate of return (FIRR) determination include capital investment and operation and maintenance. The weighted average cost of capital (WACC) of each water supply sub-component is compared with the FIRR to ascertain the financial viability of the Project.

3. Tariff Policy for Rural Water Supply. As a general national policy (CDRC, July 2007), rural water users are charged based on actual water consumption There are no definite guidelines on the degree of cost recovery for rural water supply systems as in the case of urban water supply. The poverty counties can gradually introduce water tariffs at cost recovery levels and county finance bureaus can provide appropriate subsidies targeting the poor. The County Price Bureau, in consultation with the Water Resources Bureau, determines the appropriate water tariffs and conducts public consultations. The County Health Bureau monitors the quality of rural drinking water and ensures compliance of water providers to national drinking standards.

4. Financial Assumptions and Results. Assumptions include: (i) 25 year evaluation period; (ii) costs and revenues based on November 2009 prices; (iii) civil works' economic life of 30 years; (iv) 10 years economic life for electrical and mechanical equipment; (v) 4% annual increase of rural town household incomes; (vi) physical contingencies at 10%; (vii) price contingencies and interest during construction (IDC) excluded; (viii) foreign exchange rate of CNY6.8 to $1, (ix) operation and maintenance (O&M) costs based on the FSRs; (x) equipment replacement to be 2.5% of project capital costs on year 7 and then every 5 years; (xi) residual value in year 25; (xii) water demand based on 130 liters/capita/day (lpcd); (xiii) water losses being 10% of water production; and (xiv) allowance for bad debts being 1% of water sales and (xv) non-revenue water loss target being 10%.

5. Weighted Average Cost of Capital (WACC) and Financial Internal Rate of Return (FIRR). The WACC calculated on a post tax basis is based on LIBOR rate plus ADB margin (of 0.2%), cost of equity at 8%, assuming a risk free rate of return of 6% plus a 2% margin,

43 ADB. 2005. Financial Management and Analysis of Projects. Manila.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report income tax at 15%, domestic inflation rate is at 2% and international inflation rate of 1%. The average WACC for the nine water supply sub-components in the Project is 3.31%. Financial projections show that cumulative cash flow would meet O&M costs, debt service and equipment replacement. Water consumers need to be metered to ensure water conservation and are charged wastewater fees in year 4 of project implementation. Water tariffs are set to meet minimum financial objective of 1.2 debt service coverage starting year 4 to allow adequate funds to meet capital replacement expenditures. It is noted that rural water providers can meet this financial objective of 1.2. Table A13.1 sets out the FIRRs of the proposed water supply sub-components in the five counties. The FIRRs at these tariff levels are higher than the WACC and sensitivity analysis show favorable results at scenarios assuming (i) 10% increase in capital costs and O&M cost, (ii) 10% reduction in benefits, (iii) two-year delay in project implementation, and (iv) case 1 and case 2 combined.

Table A13.1: FIRRs of Water Supply Components (in %) County Youyang Yunyang Fengjie Wushan Chengkou FIRR – Base Case 6.9 6.2 5.6 3.5 3.4 Case 1 – 10% increase in Capital and O&M costs 5.4 5.1 3.9 2.7 2.7 Case 2 – 10% decrease in benefits 5.2 5.0 3.7 2.6 2.6 Case 3 – 2 years delay 5.6 5.1 4.5 1.7 1.7 Case 4 – Cases 1 and 2 combined 3.8 4.0 2.1 0.2 0.3 O&M = operation and maintenance.

6. The domestic tariff levels to achieve debt service coverage ratio (DSR) of more than 1.2 in 2014 assuming full O&M costs at 2% of project costs (excluding connection charges) are shown in Table A13.2. Tariffs at this level meet the financial objective of a minimum DSR of 1.2 and result in cash flow surplus in 2014. Affordability analysis is also presented where tariffs are set to meet a DSR of 1.2. Tariffs are affordable where they do not exceed 3-5% of monthly household incomes at 13-14 m3 per month water consumption. Water bill includes VAT and other levies at 6.5% but excludes the wastewater fee.

7. In Chengkou, the monthly water bill is CNY28.7 ($4.2) which is 1.7% of the average household income while low income households consuming less at 60 liters/capita/day (lpcd), are paying CNY13.2 ($1.9) per month, or 1.6% of their monthly household income. In Youyang, the monthly water bill is CNY22.6 ($3.3) which is 1.4% of average household income, or 1.3% of low income household. In Fengjie, Yunyang and Wushan with tariff of CNY2.13 ($0.31) per m3, CNY2.79 ($0.41) and CNY1.96 ($0.29) per m3, the monthly water bill is at CNY30.6 ($4.5) to CNY22.6 ($3.3), respectively which comprises 1.6% of average income household.

Table A13.2: Affordability at Tariffs set to meet DSR of 1.2 in 2014 Items Youyang Yunyang Fengjie Wushan Chengkou Domestic Tariff (CNY/m3) 1.60 2.79 2.13 1.96 1.92 WACC 2.8% 2.9% 3.1% 2.8% 3.0% DSR (2014) = Net Revenues/Debt Service 5.05 4.35 4.04 3.43 3.01 Average Income HH Water bill CNY/month 22.6 40.6 30.6 30.2 28.7 Water and Wastewater bill CNY/month 27.9 46.1 35.9 35.9 34.3 Monthly income 1,634 2,254 1,943 1,778 1,730 Affordability (% HH Income) – Water 1.4% 1.8% 1.6% 1.7% 1.7% Affordability (% HH Income) – Water and Wastewater 1.7% 2.0% 1.9% 2.0% 2.0% Low Income HH Water bill CNY/month a 10.4 18.7 14.1 13.9 13.2 Water and Wastewater bill CNY/month 12.9 21.3 16.6 16.6 15.8 Monthly income 783 962 906 852 829 Affordability (% HH Income) – Water 1.3% 1.9% 1.6% 1.6% 1.6% Affordability (% HH Income) – Water & Wastewater 1.6% 2.2% 1.8% 1.9% 1.9% DSR = debt service coverage ratio, HH = household, m3 = cubic meter. a Monthly consumption of 60 lpcd for low income HH and 130 lpcd for the average income HH.

8. Conclusions. In the case of gravity-fed, least cost rural water supply systems, tariffs can be set gradually to cover O&M, periodic repairs and debt service. To improve urban

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report water supply system' financial performance, it is proposed that water losses be reduced to below 17% and staffing be rationalized. As part of demonstration features for rural water supply systems, the following measures are recommended: (i) tariffs are set gradually to achieve a DSR of 1.2, and ensure that O&M costs, debt service can be met; and (ii) wastewater fee be charged in year 4 of project implementation as a measure to address the need for proper wastewater management and ensure its long-term sustainability. The five counties will pilot operational reforms in their urban water supply systems aimed at improving the water services delivery, rationalize tariffs and costs thereby improving the financial viability of their current water supply operations.

C. Counterpart Funding and Sustainability

9. District and county counterpart contributions for sub-components water supply and roads construction or rehabilitation range from 0.6% (Fuling District) to 1.8% (Wushan County) in 2011. Debt servicing in 2017 is projected to account 0.1% (Fuling District) to 0.5% (Youyang County) of their projected annual revenue or an average of 0.3%. Adding the water supply loan debt servicing, repayment will be equivalent to about 0.4% of their projected annual revenue. Hence, the eight poverty districts/counties will be able to provide the counterpart funding as well as debt servicing of the sub-components. Refer to Table A13.3 below.

Table A13.3: Counterpart Funds and Debt Service as % of Revenue (CNY '000) % of Counterpart Debt Service (2017) as % Counterpart Funds District or Fund to Revenue of Revenues County Combined Roads 2011 2012 2011 2012 Roads and Water Supply Fuling 31,416 73,304 0.6 1.1 0.1 0.1 Qianjiang 35,312 82,396 1.1 2.1 0.3 0.3 Youyang 17,972 41,935 0.7 1.3 0.5 0.7 Xiushan 56,243 131,233 1.8 3.2 0.3 0.3 Yunyang 37,312 87,060 1.0 1.8 0.2 0.3 Fengjie 48,409 112,955 1.2 2.1 0.4 0.5 Wushan 29,050 67,782 1.8 4.1 0.4 0.4 Chengkou 31,722 74,018 1.7 3.2 0.5 0.5 Source: Districts and Counties’ Revenues and Expenditures Data, 2008.

10. Supplementary Appendix P presents the detailed roads sustainability assessment. In 2008, average funding per km averages CNY4,123 ($606) higher by 7.5% to CNY3,835 ($564) in 2004. The bulk of the maintenance expenditure (60%) is for normal/routine maintenance such as repairing potholes, and is done by district and county Road Bureaus staff. Prior to 2009, vehicle owners are charged maintenance fees to cover road maintenance requirements and in 2009, the fuel tax was introduced as source of funding for road maintenance.44 For the project roads, the appropriate maintenance funding support per km was agreed with the eight poverty districts and counties. CMG has also agreed to undertake a maintenance program through the capacity development component, and as an assurance. A road O&M specialist will develop appropriate road maintenance plans for the 21 roads to ensure their long term sustainability.

44 The fuel tax is channeled to CMG Finance Bureau, and distributed to Chongqing Municipal Transport Commission for transport management and road maintenance. CMG in 2008 allocated: CNY20,000 ($2,941) /km for provincial roads; CNY7,000 ($1,029) /km for county roads, CNY3,500 ($515) /km for township roads, and CNY1,000 ($147) /km for village roads.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 14 SUMMARY ECONOMIC ANALYSIS

A. INTRODUCTION

1. The economic analysis of the Project covers eight poverty districts/counties, with 21 roads and nine water supply sub-components. For the overall Project, the analysis covers (i) the economic rationale for public intervention, (ii) the goals of the investment plan, and (iii) the design of the plan. The economic analysis also evaluates the sub-components relative to least-cost analysis criteria and standard benefit cost analysis.

2. Rationale for Public Intervention. The water supply and road sectors continue to be priority sectors under the 11FYP which emphasizes the provision of safe and potable water, expanding the service coverage area, rehabilitating water treatment plants (WTPs) and distribution networks. The thrust for the road sector is to construct about 3.7 million kilometers (km) of roads in 2020. The development of Chongqing is anchored on the Government of PRC’s 11FYP, which emphasizes the development of rural areas that are primarily dependent on agriculture for their livelihood to increase their economic growth and for district/county-level urban centers to enhance their economic relationship with rural towns and thus directly contribute to the municipal objective of promoting integrated urban-rural development. Ranked 19th among the 31 provinces/municipalities in GDP per capita, Chongqing’s promotion of economic development combines urban and rural growth management. The proposed ADB financing offers rural towns/townships of poverty districts/counties the opportunity to develop their infrastructure and enable investments in resource processing, manufacturing and services. CMG is promoting development of poverty districts/counties in a more coordinated manner by bringing about more sustainable investments in physical infrastructure and environmental management to improve the urban and rural quality of life. Involvement of CMG is justified since the integrated urban-rural development program covers eight poverty district/counties. District/county and town/township governments are coordinating and implementing the transport and water supply master plans to ensure integrated investments in roads and water supply systems, and better manage these project facilities.

3. Goals and Design of the Project. The Project is a direct response to Chongqing’s 11FYP to promote sustainable economic development via construction and upgrading of road and water supply facilities. The 11FYP recognizes that achievement of these goals will require improvement of basic services and urban and rural environmental improvement by districts/counties in these areas. All sub-components in the Project are integral components in the 11FYP. The district/county and town/township government master plans are reasonably sound and are integrated with the overall planning process.

B. LEAST COST ANALYSIS

4. The proposed investments are the least cost solutions to achieve the project development objectives and to meet demand forecast. Least cost analysis (LCA) was conducted throughout sub-component selection and preliminary design to ensure that the selected investments are the most economical interventions. LCA compares economic costs of technically viable project options and selects the one with the lowest present value of economic costs. For the water supply sub-components, the number, location, and size of the WTPs were based on: (i) proximity to water supply source, (ii) absence of any planned settlements in the future, (iii) terrain, and (iv) land availability. Comparison of alternative WTP sites has been undertaken on an engineering perspective. The selection of water treatment process is based on the principle that WTPs must be designed to comply with government national drinking standards, thus the most common and frequently used process of flocculation, sedimentation, filtration and disinfection is adopted in water purification which is more economical than other more complex process. While water transmission and distribution pipelines are based on terrain condition and water consumer’s distribution. Two types of pipes are analyzed and the results showed that PE pipe (CNY1.59 ($0.234) /cubic

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report meters [m3]) is marginally cheaper than steel pipe (CNY1.60 ($0.235) /m3). Cost effectiveness analysis of new road construction is based on minimizing cost per km or passenger per km to ensure the selection of most efficient alternative for detailed analysis.45 Two road pavement standards have been considered as improvement or construction options in the least cost analysis. The results indicated that concrete pavement has the lowest present value of economic cost (PVEC) estimated at CNY59.9 million ($8.81 million) compared to the PVEC of bituminous pavement estimated at CNY61.8 million ($9.09 million). Cement concrete is cheaper by about 3%.

C. DEMAND FORECAST

5. Rural Roads. Road improvement is based on annual average daily traffic (AADT) derived from traffic surveys and corresponding weights applied for different periods of the year.46 Forecast traffic is extrapolated based on traffic trends and/or income elasticity of demand based on GDP growth. Different income elasticities for passenger traffic and freight traffic are assumed for each sub-component. Generated traffic is assumed to be 10%-20% of total forecast traffic.

6. Water Supply. Water demand projections are based on projected service area population, existing and future consumption. Assumptions include: (i) 2009 per capita demand of 130 liters/capita/day (lpcd) without increase over a 25-year period; (ii) annual population increase; (iii) household size constant; (iv) 80% of households will be connected to water supply in Year 1 of operation increasing to 100% over the next 5 years for all sub- components; (v) non-domestic demand based on actual conditions; and (vi) losses at 10% of water production.

D. EVALUATION OF INDIVIDUAL SUB-COMPONENTS

7. In addition to being part of the plan, each sub-component is economically justified. Economic internal rates of return (EIRRs) were estimated for rural roads and water supply sub-components. The EIRRs were compared with the economic opportunity cost of capital (EOCC), which was assumed at 12%. A number of benefits have not been quantified, and those related to water supply sub-components have been reflected in the consumer’s willingness to pay for adequate water supply and include improvements in health, productivity and employment. Economic benefits that were quantified include: (i) rural roads – (a) savings in vehicle operating costs, (b) time savings due to improved travel, (c) savings from fewer accidents, (d) generated traffic benefits, and (e) income gains created by year round road access; and for (ii) water supply – (a) resource cost savings (user cost savings and user time savings), and (b) incremental water consumption brought about by the sub- component.

8. Economic analysis was conducted over 25 years including project construction and assumed residual value in year 25. Economic benefits and costs are denominated in domestic price numeraire at constant November 2009 prices. Foreign exchange rate used is CNY6.8 to $1. Project tradable components were adjusted to economic prices using shadow exchange rate factor of 1.08. Non-tradable components were valued at domestic market prices. Unskilled labor was valued at a shadow wage rate of 0.67, reflecting the low productivity of unskilled labor. Project costs and benefits were estimated on a without-and with-project basis. Transfer payments were excluded in the valuation of cost estimates in economic prices. Standard sensitivity tests, and an additional test for 2-year implementation

45 Road surface design standards considered: asphalt concrete pavement, cement concrete pavement. Both surface standards have gravel shoulder of 0.5 meters on both sides and concrete stabilization sub-base. 46 Monthly figures are adjusted for seasonal factors, such as holidays, weather, and harvests, to give a seasonally adjusted AADT.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report delay, were conducted. 47 Sensitivity indicator (SI) and switching value (SV) were calculated.48

9. Rural Roads. The rural road sub-components (Chengkou, Fengjie, Fuling, Qianjiang, Wushan, Xiushan, Youyang, and Yunyang) will construct and/or rehabilitate about 362 km of roads consisting of 21 road sub-components. In 2015, average estimated normal traffic level ranges from 705 to 3,426 passenger car units per day. The average vehicle fleet vehicle operating cost (VOC) with-project case is CNY1.4 ($0.21) /vehicle-km. The benefits of generated traffic are estimated at half the VOC of normal traffic. Travel time savings are valued for passengers in vehicles only, as the time of crew members are valued in VOCs. The time values of passengers are valued at 67% of the average wage. The average values used per person-hour are CNY5.0 ($0.74) for car passengers and CNY3.8 ($0.56) for bus passengers. The average economic cost of an accident is estimated at CNY0.0529 ($0.00778) /vehicle-km. In addition, annual income gain is estimated at CNY700. The roads EIRRs ranged from 15.7% to 18.1%, exceeding EOCC, are economically justified. Results are shown in Table A14.1. Sensitivity tests indicate that the results are robust and the proposed rural roads are recommended for implementation. Based on SI and SV parameters, the rural road sub-components are more sensitive to a decline in benefits than an increase in costs.

Table A14.1: Results of Economic Analysis for Roads – EIRR, SI, and SV in %, NPV (CNY million) Chengkou County Fengjie County Fuling District Qianjiang District Scenario EIRR NPV SI SV EIRR NPV SI SV EIRR NPV SI SV EIRR NPV SI SV Base 18.1 54.6 15.7 46.3 18.3 51.3 17.3 59.9 case Case 1 16.7 44.5 0.8 42.0 14.3 30.6 0.9 26.5 16.6 41.3 0.9 38.7 16.0 48.3 0.7 41.2 Case 2 16.5 38.9 0.9 38.1 14.2 26.0 1.0 24.0 16.5 36.2 1.0 35.1 15.9 42.3 0.8 37.3 Case 3 15.1 28.4 1.7 20.4 12.8 10.4 1.8 12.8 14.9 26.2 1.8 18.9 14.7 30.7 1.5 20.0 Case 4 16.8 41.4 0.0 0.0 14.8 33.4 0.0 0.0 16.4 36.2 0.0 0.0 17.1 54.3 0.0 0.0 Wushan County Xiushan County Youyang County Yunyang County Scenario EIRR NPV SI SV EIRR NPV SI SV EIRR NPV SI SV EIRR NPV SI SV Base 17.0 45.6 17.0 86.9 15.8 19.5 17.1 62.4 case Case 1 15.7 36.3 0.8 39.1 15.7 68.6 0.8 38.5 14.5 13.9 0.8 29.8 15.8 50.3 0.8 39.8 Case 2 15.6 31.7 0.8 35.4 15.5 59.9 0.8 34.9 14.4 11.9 0.9 27.0 15.7 44.1 0.8 36.1 Case 3 14.3 22.4 1.6 18.9 14.3 41.6 1.6 18.7 13.2 6.2 1.7 14.5 14.5 32.0 1.6 19.3 Case 4 16.5 33.4 0.0 0.0 16.3 73.0 0.0 0.0 15.2 15.4 0.0 0.0 16.8 55.2 0.0 0.0 EIRR = economic internal rate of return, NPV = net present value, SI = sensitivity indicator, SV = switching value. Source: ADB estimates.

10. Water Supply. The nine water supply sub-components in Chengkou, Fengjie, Wushan, Youyang and Yunyang have combined capacity of 72,500 m3 per day. Economic benefits were based on user and time cost savings and incremental consumption brought about by the new and expanded water supply services (Table A14.2).49 The total economic cost of non-incremental water depends on time spent in collection and boiling or filtering before use. The average time spent in collecting water is 2.8 hours per day as determined from the socioeconomic surveys. The value of time is measured at 67% of the average wage rate of CNY20 ($2.9) per day. The monthly average cost of boiling water ranged from CNY15 ($2.2) to CNY100 ($14.7). It is estimated that households with the new and expanded water supply services will increase their water consumption by 30%. The value of incremental water is based on the average willingness to pay as proxy for the demand price of water which ranges from CNY1.8 ($0.26) /m3 to CNY2.8 ($0.41) /m3. The total value of non-incremental and incremental water makes up the gross total economic benefits of the

47 Case 1: increase in capital and operating costs, Case 2: 10% decrease in benefits, Case 3: 10% increase in costs and 10% decrease in benefits, and Case 4: 2-year implementation delay. 48 The lower the SV, the more sensitive the EIRR (or NPV) is to the change in the variable concerned and the higher the risk with the Project. 49 Health benefits were estimated but not considered in the EIRR estimations since they are an assumed part of willingness to pay.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report water supply sub-components. With the EIRRs ranging from 17.3% to 19.7%, the sub- components are economically justified and are feasible under various sensitivity tests. SI and SV results indicate that water supply sub-components are more sensitive to a reduction in benefits than an increase in costs.

Table A14.2: Results of Economic Analysis for Water Supply EIRR, SI and SV in %, NPV in CNY million Chengkou County Fengjie County Wushan County Scenario EIRR NPV SI SV EIRR NPV SI SV EIRR NPV SI SV Base case 17.9 4.3 17.7 10.7 18.2 9.7 Case 1 15.7 2.9 1.2 27.1 16.8 9.9 0.3 13.7 16.1 6.7 1.2 28.5 Case 2 15.5 2.5 1.3 24.6 15.4 6.2 1.3 24.9 15.8 5.8 1.3 25.9 Case 3 13.4 1.1 2.5 13.3 13.5 2.9 2.4 13.4 13.8 2.9 2.5 13.9 Case 4 14.6 2.0 0.0 0.0 14.6 5.4 0.0 0.0 15.1 5.1 0.0 0.0 Youyang County Yunyang County Scenario EIRR NPV SI SV EIRR NPV SI SV Base case 19.7 75.0 17.3 38.0 Case 1 17.6 58.5 1.6 54.0 15.5 28.6 1.1 28.8 Case 2 16.3 41.5 2.9 34.5 14.1 17.1 1.8 17.6 Case 3 15.9 40.8 1.0 9.5 14.0 18.3 0.7 4.1 Case 4 16.2 43.7 0.0 0.0 14.2 19.1 0.0 0.0 EIRR = economic internal rate of return, NPV = net present value, SI = sensitivity indicator, SV = switching value. Source: Asian Development Bank estimates.

11. The overall EIRR of the Project is estimated at 17.6%. For the 21 road sub- components, the overall EIRR is 17.0%, and for the nine water supply sub-components, the overall EIRR is 18.2%.

Table A14.3: Overall EIRRs for Rural Roads and Water Supply Sub-components Rural Roads Water Supply Scenario EIRR NPV SI SV EIRR NPV SI SV Base case 17.0 383.7 18.2 82.2 Case 1 15.7 297.3 0.8 35.7 16.3 62.0 1.1 30.4 Case 2 15.6 259.0 0.9 32.4 15.4 43.5 1.7 25.5 Case 3 14.2 172.6 1.7 17.3 14.1 31.3 1.8 10.8 Case 4 16.2 302.5 0.0 0.0 14.9 47.1 0.0 0.0

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report APPENDIX 15 FULL LIST OF ASSURANCES

1. In addition to standard assurances, the executing agency (EA), implementing agencies (IAs), and the implementing units (IUs) provide the specific assurances summarized below, which will be incorporated in the Loan and Project Agreements.

A. Engineering and Technical

Roads

2. CMG will cause the IAs to ensure that the roads to be constructed under the Project are consistent with the relevant development master plans of the respective districts/counties.

3. CMG will, and will cause the IAs to, coordinate and agree with neighboring district/county governments and other government agencies to ensure that the design standards of the roads constructed under the Project are consistent with the standards of the inter-connecting roads.

4. The Government will cause Guizhou Provincial Government and Songtao County Government to ensure that the Sanyang–Taohuayuan Road is operational prior to the operations of the Meijiang–Yunai Road constructed under the Project.

5. CMG will cause the IAs to cooperate with all relevant agencies to promote traffic safety provisions for all roads constructed under the Project, including the provision of adequate traffic and safety signage, signal lamps, median separators, traffic control and other necessary facilities. CMG will also cause the IAs to ensure that traffic safety education activities are conducted by means of radio and television in both Chongqing dialect and Mandarin and traffic safety booklets to enhance the traffic safety awareness of the local people.

6. CMG will cause the IAs to (i) prepare a sustainable road maintenance program; (ii) prepare a budget plan on an annual basis for the maintenance of the roads under their supervision; and (iii) provide sufficient financial and staffing resources to the relevant local bureau responsible for road maintenance to carry out the program.

Water Supply

7. Prior to the processing of the construction tenders for the water supply sub- components, CMG will cause the IAs to ensure that relevant national laws and municipal regulations on water source protection are complied with, including (i) the declaration of the water source protection area/s; (ii) delineation of water source protection zone/s; and (iii) the implementation of watershed protection regulations, including the disclosure of land use and activity constraints. The IAs will ensure compliance throughout the implementation of the Project.

8. CMG will cause the IAs to ensure that (i) water source facilities are constructed and in operation prior to the completion of the water-supply systems constructed under the Project; (ii) adequate water supply for the Project will be maintained throughout the Project, including in the event of the increase of users; and (iii) the construction and operation of the water source facilities will be in accordance with all relevant environmental protection requirements.

9. CMG will cause the IAs to ensure that the water treatment facilities, water transmission and distribution pipelines, equipment and instrumentation constructed under the Project will be operated and maintained in accordance with prescribed standards, specifications and regulations.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report

10. CMG will cause the relevant IAs to ensure that water distribution systems to individual end-users will be established, operated and metered in a manner that would minimize any unaccounted-for-water once the water supply under the Project has been constructed and in operation.

11. CMG will cause the IAs to ensure that all wastewater generated by each of the water supply systems constructed under the Project will be adequately collected and treated in accordance with all applicable national laws and municipal and local regulations. This includes (i) the development of centralized wastewater collection and treatment systems; or (ii) where wastewater generators are dispersed, the development of decentralized wastewater collection and treatment systems, which are appropriate to the location, scale of development and the resources of the IAs.

12. CMG will cause Youyang County Government to ensure that the operators of the Mawang Town water supply system will provide a riparian release from the upstream Shengli Reservoir in order to ensure sufficient river flows in months of water deficit, and that the amount of release to be made will be verified and agreed by the county government prior to the operation of the facility, and such release will be continuously monitored.

B. Design and Construction Quality and Management

13. Prior to the construction of the roads under the Project, CMG will cause the IAs to complete stringent geological (including seismic) and geotechnical investigations during the preparation of the detailed designs, and ensure that adequate risk mitigation is fully incorporated in the designs of bridges, foundations, slopes, pavements, tunnels, buildings and other physical infrastructures, to ensure compliance with all relevant national, municipal and local design codes and standards.

14. CMG will cause the IAs to ensure that all works under the Project are designed and constructed in accordance with national standards and specifications, and that the construction supervision, quality control, contract management, and completion inspection and acceptance procedures follow all applicable national, provincial and local laws and municipal regulations.

C. Counterpart Funding

15. CMG will cause the IAs to provide counterpart funding in a timely manner, including any additional counterpart funding required for any shortfall of funds or cost overruns.

16. CMG will cause the IAs to maintain adequate annual funding for the operation and maintenance of Project facilities, and that they will be operated and maintained in accordance with applicable engineering practices.

D. Tariff and Cost Recovery

17. CMG will cause the IAs to ensure that (i) water supply tariffs will be set progressively in order to achieve cost recovery; (ii) annual review of tariffs and fees will be undertaken in accordance with specified tariff setting mechanisms; and (iii) the impact to the poor of water supply connection fees and tariffs will be assessed and, based upon the assessment, necessary subsidies will be provided to ensure water provision to the poor.

18. During the process of establishing and adjusting water tariffs, CMG will cause the IAs to take into consideration (i) the minimum tariff level to cover basic operating costs, debt service and capital replacement, and achieve a debt service ratio of 1.2; (ii) affordability and willingness-to-pay data from available surveys; and (iii) recent price escalations. CMG will also cause the IAs to include public consultation in the tariff setting process.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report 19. To ensure financial sustainability of the Project’s facilities, the EA will cause the IAs to ensure that the implementation units (IUs) for the water supply sub-components to maintain adequate operation and maintenance activities to ensure non-revenue water losses at or below 10% of water production.

E. Financial Management

20. CMG will cause the IAs to ensure that the IUs establish and maintain sound financial management systems in accordance with ADB’s Financial Management and Analysis of Projects, including the establishment of separate Project accounts and records. The financial management system will include (i) financial planning, budgeting and budgetary control; (ii) accounting systems consistent with applicable PRC standards; (iii) internal control; (iv) data processing and systems financial reports; and (v) audit.

F. Change in Ownership

21. CMG will ensure that in the event of (i) any change in ownership or control of the Project facilities; or (ii) any sale, transfer, or assignment of the shares of any of the IUs is anticipated, CMG will consult with ADB at least six (6) months prior to the implementation of such change. CMG and the IAs will further ensure that such changes are carried out in a lawful and transparent manner.

G. Construction Contractors

22. CMG will cause IAs to ensure that the bidding document for works contracts will include provisions to require the contractors to (i) have a minimum of 30% of its labor force consist of women, the poor, and ethnic minorities; (ii) provide equal pay for equal work, regardless of gender or ethnicity; (iii) provide the timely payment of wages; (iv) use local unskilled labor, as applicable, (v) comply with core labor standards and the applicable labor laws and regulations, including stipulations related to employment, e.g. health, safety, welfare and the workers’ rights, and anti-trafficking laws; and (vi) not employ child labor. CMG will further cause the IAs to maintain records of labor employment, including the name, age, gender, working time, and the payment of wages and ensure that the records are included into the project performance management system (PPMS).

23. CMG will cause the IAs to ensure that the contractors will (i) implement an HIV/AIDS and sexually transmitted infections (STIs) awareness and prevention training for all employees; (ii) provide necessary measures to ensure the safety and health of its employees; (iii) together with the local health bureaus, disseminate information on the risks, hazards, impacts and prevention know-how on STIs and HIV/AIDS among the staff, workers on the construction sites and the local community by means of information disclosure, education and consultation; and (iv) observe local customs concerning acceptable behavior toward the local population.

H. Women

24. CMG will cause the IAs to (i) implement the Gender Action Plan (GAP) including taking all reasonable and necessary steps to encourage women living in Project areas to participate in the planning and implementation of the Project; and (ii) monitor the Project's impacts on women during Project implementation and report them in the PPMS.

I. Social Action Plan

25. CMG will cause the IAs to implement in a timely manner the Social Action Plan (SAP) including on (i) the pilot demonstration activity on school-based water and sanitation and environmental health and awareness programs in Youyang and Yunyang; and (ii) awareness campaign on the prevention of STIs and HIV/AIDS.

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report J. Land Acquisition and Resettlement

26. CMG will cause the IAs to (i) ensure that any land acquisition under the Project will be implemented in accordance with the Resettlement Plans (RPs), all applicable PRC laws and regulations, and ADB’s Involuntary Resettlement Policy (1995); (ii) update each RP based on final design, including detailed measurement surveys and as such, updated RPs will be submitted to ADB for its concurrence prior to award of any related civil works; (iii) disclose each updated RP to affected people in accordance with ADB’s applicable information disclosure requirements for resettlement; (iv) provide compensation and other entitlements to all affected people in accordance with each approved RP, prior to commencement of construction activities; (v) assign adequate numbers of staff and resources to supervise, internally monitor, and evaluate the implementation of each RP; (vi) provide CMG and ADB with a semiannual internal monitoring report during resettlement implementation and a resettlement completion report; (vii) engage an independent monitoring agency acceptable to ADB to carry out monitoring and evaluation, including data disaggregated by gender where applicable, and forward reports to ADB semi-annually during resettlement implementation and annually for two years after completion of resettlement; and (viii) promptly advise ADB of any changes in the resettlement impacts and, if necessary, submit a revised RP to ADB for its approval.

K. Ethnic Minorities

27. CMG will cause the IAs to implement the Ethnic Minority Development Plan (EMDP) whereby (i) benefits will target ethnic minorities in the Project areas in accordance with ADB's Policy on Indigenous Peoples; (ii) contract for works will specify requirements to comply with SAP and EMDP and, as a priority, provide employment to ethnic minorities; and (iii) adequate staff and resources will be dedicated to supervise and monitor the implementation of the EMDP and its progress, which will be reported to ADB on a semi- annual basis. CMG will also engage an independent monitoring agency acceptable to ADB to monitor the implementation of the EMDP on a semi-annual basis, and submit the monitoring report to ADB. The monitoring data shall be disaggregated by ethnicity (and gender and poor/non-poor), and each monitoring report shall include an analysis of social impacts by ethnicity and gender.

L. Environment

28. CMG will cause each IA to construct, operate, maintain and monitor the Project facilities in strict conformity with (i) all applicable laws and regulations, including national and municipal regulations and standards on environmental protection, wastewater treatment, sediment and sludge disposal, health, labor, and occupational safety and ADB’s Environment Policy; and (ii) all environmental mitigation and monitoring measures detailed in the environmental impact assessments (EIAs), summary EIA (SEIA) and environmental management plan (EMP) for the Project under the guidance of the Chongqing Environmental Protection Bureau (CEPB) or other designated environmental monitoring centers. CMG will cause the IAs to incorporate such mitigation and monitoring measures into the design and bidding documents and construction contracts. Throughout Project implementation, CMG, the IAs and the IUs will review any changes to the Project design that may potentially cause negative environmental impacts, and in consultation with ADB, revise environmental monitoring and mitigation measures as necessary to assure full environmental compliance.

29. CMG will cause the IAs to ensure that sufficient resources and full time personnel are provided in monitoring EMP implementation, under the guidance of the CEPB, district/county EPBs, or other environmental monitoring centers. The IAs will ensure that the implementation units provide semi-annual environmental monitoring reports throughout the construction period to the CPMO, who will in turn prepare and submit to ADB semiannual environmental reports in a format acceptable to ADB.

30. CMG will cause each IA to (i) select spoil disposal sites appropriate to the scale of

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Chongqing Urban-Rural Infrastructure Development Demonstration Project: Final Report spoil generated before construction commences, (ii) endorse such sites as being consistent with the selection criteria set out in the EMP, and (iii) manage the sites in accordance with the EMP.

M. Public Awareness

31. CMG will cause the IAs to undertake public awareness campaigns on the Project and its benefits, including but not limited to information related to the RPs, EMPs, EMDP, GAP and SAP under the Project, to be conducted through information disclosure, education and consultation, in both the Chongqing dialect and Mandarin.

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