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Document of The World Bank Public Disclosure Authorized Report No: 20204-CHA Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$210 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA Public Disclosure Authorized FOR THE YANGTZE DIKE STRENGTHENING PROJECT May 31, 2000 Public Disclosure Authorized Rural Development & Natural Resources Sector Unit East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective January, 2000) Currency Unit = Renminbi (RMB) or Yuan (Y) Y 1.00 = US$ 0.12 US$ 1.00 = Y 8.3 FISCAL YEAR January 1 - December 31 ABBREVIATIONSAND ACRONYMS bcm billion cubic meters mu 0.667 hectare (ha) or 0.164 acres mcm million cubic meters CAS Country Assistance Strategy MOF Ministry of Finance CC Construction Contractor MWR Ministry of Water Resources C/EMO Overall Environmental Coordinator NCB National Competitive Bidding CIDA Canadian International Development Agency NPV Net Present Value COL Collaboration O & M Operation & Maintenance CON Consultation PAP Project Affected People CPCO Central Project Coordination Office PFB Provincial Financial Bureau CWRC Changjiang Water Resources Commission PIP Project Implementation Plan CWRCDI Changjiang Water Resources Commission Design Institute PLG Project Leading Group ECI Environmental Construction Inspector PMO Project Management Office EIA Environmental Impact Assessment POE Panel of Experts EMO Environmental Management Office PPLG Provincial Project Leading Group EMP Environmental Management Plan PPMO Provincial Project Management Office EPM Environmental Protection Measures PRC People's Republic of China ERR Econornic Rate of Return RAP Resettlement Action Plan FMS Financial Management System RC Reinforced Concrete FY Fiscal Year RO Resettlement Office GIWP General Institute Water Resources SDPC State Development & Planning Planning and Design Comnmrission IBRD International Bank for Reconstruction & Development TGP Three Gorges Project ICB International Competitive Bidding VEO Village Environmental Office ICR Implementation Completion Report WB World Bank IDA International Development Association WBD World Bank Division IS Information Sharing WCB Water Conservancy Bureau LPLG Local Project Leading Group WCBHB Water Conservancy Bureau Hubei LPMO Local Project Management Office WR Water Resources Vice President: Jemal-ud-din-Kassum, EAPVP Country Director: Yukon Huang, EACCF Sector Director: Geoffrey Fox, EASRD Task Team Leader: Daniel Gunaratnam, EACCF CHINA YANGTZE DIKE STRENGTHENINGPROJECT CONTENTS A. Project DevelopmentObjective Page 1. Project developmentobjective 2 2. Key performanceindicators 2 B. Strategic Context 1. Sector-relatedCountry Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Sector issues to be addressedby the project and strategic choices 5 C. Project Description Summary 1. Project components 7 2. Key policy and institutionalreforms supported by the project 10 3. Benefits and target population 11 4. Institutionaland implementationarrangements 11 D. Project Rationale 1. Project alternativesconsidered and reasons for rejection 13 2. Major related projects financed by the Bank and other developmentagencies 14 3. Lessons learned and reflected in proposed project design 15 4. Indicationsof borrowercommitment and ownership 16 5. Value added of Bank support in this project 16 E. Summary Project Analysis I. Economic 176 2. Financial 17 3. Technical 19 4. Institutional 22 5. Environment 23 6. Social 25 7. SafeguardPolicies 28 F. Sustainabilityand Risks 1. Sustainability 29 2. Critical risks 29 3. Possible controversial aspects 30 G. Main Loan Conditions 1. EffectivenessCondition 2. Other 30 30 H. Readiness for Implementation 33 I. Compliancewith Bank Policies 34 Annexes Annex 1: Project Design Summary 35 Annex 2: Project Description 38 Annex 3: EstimatedProject Costs 50 Annex 4: Cost Benefit Analysis Summary 55 Annex 5: Financial Summary 72 Annex 6: Procurementand Disbursement Arrangements 74 Annex 7: Project Processing Schedule 88 Annex 8: Documents in the Project File 89 Annex 9: Statementof Loans and Credits 91 Annex 10:Country at a Glance 96 Annex 11: EnvironmentalImpact Assessment 98 Annex 12:Resettlement Action Plan 118 Annex 13: Financial Management 139 MAP(S) IBRD 30696 IBRD 30697 CHINA Yangtze Dike StrengtheningProject Project Appraisal Document East Asia and Pacific Region EACCF Date: May31, 2000 Team Leader: Daniel J. Gunaratnam Country Manager/Director:Yukon Huang Sector Manager/Director: Geoffrey B. Fox Project ID: P064730 Sector(s): Al - Irrigation & Drainage LendingInstrument: SpecificInvestment Loan (SIL) Theme(s): Water Poverty Targeted Intervention: N ProjectFinancing Data [ Loan C Credit El Grant Cl Guarantee L Other (Specify) For Loans/Credits/Others: Amount(US$m): 210 ProposedTerms: Variable Spread & Rate Single Currency Loan (VSCL) Graceperiod (years): 5 Yearsto maturity:20 Commitrnentfee: 0.75% Frontend fee on Bankloan: 1.00% Fi.,--' n ---'Surc '&~at'or~i~-- .. GOVERNMENT 328.11 7.40 335.51 IBRD 0.00 210.00 210.00 Total: 328.11 217.40 545.51 Borrower:PRC Responsibleagency: MWR/CHANGJIANGWR COMMISSION,HUBEI AND HRUNANPROVINCES ProvincialFinance Bureau, Hubei Province Address: No 8 ZhongbeiRoad,Wuchang, Wuhan, 430071, Hubei Province, PRC Contact Person: Vice Governor Tel: 86-27-87824427 Fax: 86-27-87849682 Email: Other Agency(ies): Finance Bureau, Hunan Province Address: No 1 West Cheng'nan Road, Changsha City, 410015, Hunan Province, PRC ContactPerson: Vice Governor Tel: 86-731-5165180 Fax: 86-731-5165184 Email: Ministry of Water Resources Address: No 2 Baiguanglu Ertiao, Xuanwu District, Beijing, 100053, PRC Contact Person: Vice Minister Tel. 86-10-63202821 Fax: 86-10-63548037 Estimateddisbursements (Bank FYIUS$M): 20( 0i 2003 20 Annual 45.0 65.0 52.0 48.0 Cumulative 45.0 110.0 162.0 210.0 Projectimplementation period: 4.0 years Expectedeffectiveness date: 09/01/2000 Expectedclosing date: 12/31/2004 OCS PAD Fo., Rov Maro, 2D) A. Project DevelopmentObjective 1. Project development objective: (see Annex 1) The main Projectdevelopment objective is to enhancethe protection of the river bank against erosion and to improve critical sections of existing main dikes along the banks of the mid-Yangtze River in Hunan and Hubei Provinces, thus protecting the properties and lives behind the dikes against floods. The Project will also support institutional reforms aimed at enhancing the existing dike operation and maintenance organizations,both organizationallyand technically. The objectivewill be achieved by: (i) strengthening the river bank and existing flood protection dikes along the Yangtze River to lower the risk of dike breaches that could lead to catastrophic damage; (ii) rehabilitatingthe flood gates and cross dike structures along the dikes to discharge flows from tributariesand curtail flood flows behind the dikes; (iii) providing flood controlfacilities for dike operation and maintenanceorganizations; (iv) expanding dike monitoring systems and developing an emergency preparednesssystem to reduce flood damage and loss of lives; (v) developing autonomousinstitutions at provincial and municipal levels based on the existing organizationsfor O&M of the dikes; and (vi) enhancing self-financing through flood levy collection from the beneficiaries for operationand maintenanceof dikes. 2. Key performanceindicators: (see Annex 1) The Project will be monitored through a set of indicators that takes into account the key elements of a sustainabledevelopment strategy for flood control:(i) reduction in flood damage through structuraland non structural measures; and (ii) establishment of self financing institutional systems to operate and maintain flood control facilities. Specifically,Project staff will monitor flood damage reduction, enforcement of policies on introducingflood protectionfees and settingup institutionalsystems for flood management.Key performance indicators will be: (i) setting up dike inspection programs; (ii) processing and evaluation of inspection results; (iii) formulation of annual maintenance programs and the funding thereof; (iv) the projected and actual cost of annual maintenanceprograms; and (v) damage occurring from floods. Project performance will be assessed for each dike section by monitoring key indicators as listed in the PIP (see also Annex 1). The indicatorswill be comparedwith: (i) benchmark parameters on maintenance costs and flood damage prior to Project implementation;and (ii) projections made for future maintenance operations. B. Strategic Context 1. Sector-relatedCountry Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Documentnumber: R 98-107 Dateof latestCAS discussion: 05/28/98 CAS document #: 16321-CHIA,February 25, 1997. Date of latest CAS discussion. March 18, 1997. CAS Progress Report #: R98-107 of May 6, 1998 discussed May 28, 1998. The Project will support Government's strategies endorsed in the CAS to: (i) promote agricultural developmentand the rural economy by incorporatingmajor water storage, transfer, irrigation drainage and flood control programs into future projects, that include institutional reform and user participation as integral components;(ii) improve cost recovery; (iii) focus on the reconstruction of essential infrastructure and reduce infrastructure bottlenecks; (iv) improve rural employment and incomes; and (v) alleviate poverty. -2 - 2. Main sector issues and Governmentstrategy: China's rivers and floodplainshave been the focus of human settlementsince