World Bank Document

Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 44913-CN

PROJECT APPRAISAL DOCUMENT

Public Disclosure Authorized ON A

PROPOSED LOAN

IN THE AMOUNT OF US$60 MILLION

TO THE

PEOPLE'S REPUBLIC OF CHINA

FOR A

Public Disclosure Authorized GUIZHOU CULTURAL AND NATURAL HERITAGE PROTECTION AND DEVELOPMENT PROJECT

April 7,2009

Urban Development Sector Unit Sustainable Development Department East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

(Exchange Rate Effective March 1, 2009)

Currency Unit = Renminbi Yuan RMB 1.0 = US$ 0.146 US$ 1.0 = RMB 6.849

FISCAL YEAR January 1 - December31

ABBREVIATIONS AND ACRONYMS

CBD Community-based Development CDD Community-driven Development CFAA China Financial Accounting Assessment CNAO China National Audit Office CPMG Community Project Management Group CPS Community Partnership Strategy CVM Contingent Valuation Method DA Designated Account EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPB Environmental Protection Bureau FMM Financial Management Manual FMS Financial Management Specialist GDP Gross Domestic Product GFB Guizhou Provincial Finance Bureau GNU Guizhou Normal University GPG Guizhou Provincial Government GTB Guizhou Provincial Tourism Bureau ICB International Competitive Bidding ICOMOS International Council on Monuments and Sites IPP Indigenous Peoples Plan MBD Model Bidding Document MOF Ministry of Finance NCB National Competitive Bidding O&M Operations and Maintenance OMCP Operation Manual for Community Participation PIU Project Implementation Unit PLG Project Leading Group PMO Project Management Office PPLG Guizhou Provincial Project Leading Group PPMO Guizhou Provincial Project Management Office FOR OFFICIAL USE ONLY RAP Resettlement Action Plan SACH State Administration for Cultural Heritage SBD Standard Bidding Document VIG Village Implementation Group VSG Village Supervision Group WA Withdrawal Application WTP Willingness-to-Pay

Vice President: Mr. James W. Adams Country Director: Mr. David R. Dollar Sector Managers: Mr. Ede Jorge Ijjasz-Vasquez Mr. Keshav Varma Task Team Leader: Ms. Shenhua Wang

I I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

CHINA Guizhou Cultural and Natural Heritage Protection and Development Project

CONTENTS

Page

I. STRATEGIC CONTEXT AND RATIONALE ...... 1 A . Country and sector issues ...... 1 B. Rationale for Bank involvement ...... 3 C . Higher level objectives to which the project contributes ...... 4

I1. PROJECT DESCRIPTION ...... 4 A . Lending instrument ...... 4 B. Program objective and phases ...... 4 C . Project development objective and key indicators ...... 5 D. Project components ...... -5 E. Lessons learned and reflected in the project design ...... 6 F. Alternatives considered and reasons for rejection ...... -8

I11. IMPLEMENTATION ...... 9 A . Partnership arrangements ...... 9 B. Institutional and implementation arrangements ...... 9 C . Monitoring and evaluation of outcomeshesults ...... 11 D. Sustainability ...... 11 E. Critical risks and possible controversial aspects ...... 12 F. Loanlcredit conditions and covenants ...... 13

IV. APPRAISAL SUMMARY ...... 14 A . Economic and financial analyses...... 14 B. Technical ...... 15 C . Fiduciary ...... 16 D. Social ...... -16 E. Environment ...... 17 F. Safeguard policies...... 18 G. Policy exceptions and readiness ...... 18 Annex 1: Country and Sector or Program Background...... 19

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 26

Annex 3: Results Framework and Monitoring...... 27

Annex 4: Detailed Project Description ...... 31

Annex 5: Project Costs ...... 37

Annex 6: Implementation Arrangements...... 39

Annex 7: Financial Management and Disbursement Arrangements ...... 44

Annex 8: Procurement Arrangements...... 56

Annex 9: Economic and Financial Analysis ...... 80

Annex 10: Safeguard Policy Issues...... 97

Annex 11: Project Preparation and Supervision ...... 110

Annex 12: Documents in the Project File ...... 112

Annex 13: Statement of Loans and Credits...... 113

Annex 14: Country at a Glance ...... 118

Annex 15: Planning Framework, Implementation Principles and Procedures ...... 120

Map: No. 36386 ...... 134 CHINA

CN-GUIZHOU CULTURAL AND NATURAL HERITAGE PROTECTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

EAST ASIA AND PACIFIC

EASUR

Date: April 7, 2009 Team Leader: Shenhua Wang Country Director: David R. Dollar Sectors: General water, sanitation and flood Sector Managers: Ede Jorge Ijjasz-Vasquez, protection sector (100%) Keshav Varma Themes: Other environment and natural Project ID: PO91950 resources management (P);Other social Environmental Assessment: Full Assessment development (P);Other urban development (S) Lending Instrument: Specific Investment Loan

[XI Loan [ ]Credit [ 3 Grant [ ]Guarantee [ ]Other:

For Loans/Credits/Others: Total Bank financing (US$ m.): 60.00 Proposed terms: The loan will be payable in 30 years, including a five-year grace period with

BORROWERRECIPIENT

Borrower: Government of China Ministry of Finance Sanlihe, Beijing China 100820 Tel: 86-10-68551 123 Fax: 86-10-68551 125 xz.guan@mof. gov.cn

Responsible Agency: Guizhou Provincial Tourism Bureau No. 242-5 North Zhonghua Road Guiyang, Guizhou Province China 550004 Tel: 86-851-6832574 / 5801590 Fax: 86-851-6825822 gzxmbl l15@,gmail.com Estimated disbursements (Bank~ ~~~ FY/US$ m) FY 09 10 11 12 13 14 15 16 Annual 0 5 7 10 13 13 7 5 Cumulative 0 5 12 22 35 48 55 60 Project implementation period: Start: September 15,2009 End: June 30,2016 Expected effectiveness date: September 15,2009 Expected closing date: June 30, 20 16 Does the project depart from the CAS in content or other significant respects? [ No Ref: PAD I.C. Does the project require any exceptions from Bank policies? Ref: PAD IKG. [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [XINO Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Ref: PAD III.E. Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Ref: PAD IKG. Project development objective Ref: PAD II.C., Technical Annex 3

The project development objective is to assist Guizhou Province in increasing economic benefits to local communities (including minority groups) through increased tourism and better protection of cultural and natural heritages.

Project description [one-sentence summary of each component] Ref: PAD II.D., Technical Annex 4

Component 1: Ethnic Minority Cultural Heritage Protection (US$44.62 million), aiming at increasing employment and incomes of residents of selected minority villages and ancient towns in Qiandongnan and Qianxinan Prefectures and improving their basic living conditions, with special attention to the protection of their cultural heritage, through the carrying out of the following:

(a) construction of small scale infrastructure facilities to serve the villages and towns;

(b) rehabilitation and conservation of unique historic buildings and construction or establishment of cultural and visitor centers;

(d) carrying out of income generation activities that preserve and protect intangible cultural heritage for provision of technical assistance, training and goods.

Component 2: Natural Heritage and Scenic Site Protection and Development (US$21.35 million), consisting the carrying out of physical investments to improve infrastructure and tourism facilities in: (a) Guanling National Geo-Park in Anshun Municipality; (b) Dingxiao National Geo-Park in Qianxinan Prefecture; (c) Wanfenglin National Scenic Park in Qianxinan Prefecture; and (d) Shanmu River Scenic Park in Qiandongnan Prefecture, including construction and/or rehabilitation of pedestrian roads, public toilets, water supply and sanitation facilities, signage, and tourist service centers, and implementation of measures for environmental and ecological protection of such parks.

Component 3: Tourism Gateway Town Facilities Development (US$16.34 million), consisting the following:

(a) construction of tourist information centers in selected counties in Qiandongnan Prefecture and provision of goods, technical assistance and training to strengthen institutional capacity, at the county level, for the promotion of tourism; and

(b) construction of the Guizhou Cultural and Natural Heritage Protection and Development Center in Guiyang, which will carry out research on natural heritage and tangible and intangible cultural heritage; host performances and lectures; provide tourist information and services; develop and deliver training in rural tourism development and management and cultural awareness and conservation; and develop a tourist destination management website for tourist sites information and marketing.

Component 4: Capacity Building and Project Implementation Support (US$1.81 million), consisting the following:

(a) strengthening of institutional capacity and capability: (i)at the provincial level to manage, implement and monitor project activities; and (ii)at the village level, for conservation of traditional buildings and for facilitating community organization and village-level activities especially in grant programs for traditional private house rehabilitation and conservation and intangible heritage preservation;

(b) strengthening of capacity and capability in the tourism sector: (i)at the county level through the provision of goods and technical assistance to Project Management Offices (PMOs); and (ii) at the provincial and local levels through provision of training for staff of PMOs, Project Implementation Units, and provincial and local government tourism administrative units; and

(c) reviewing and updating of the Guizhou Tourism Development Master Plan to align its strategies to current circumstances, including improved access of tourism sites to highways; and development of design guidelines for the conservation of traditional buildings and traditional environments in minority villages.

Which safeguard policies are triggered, if any? Re$ PAD IVY., Technical Annex 10

Environmental Assessment (OP/BP 4.01); Physical Cultural Resources (OP/BP 4.1 1); Involuntary Resettlement (OPiBP 4.12); Indigenous Peoples (OP/BP 4.10)

Significant, non-standard conditions, if any, for: Re$ PAD III.F. The following covenants are included in the Project Agreement:

Loan Effectiveness Condition: There is no loan effectiveness condition.

Dated Implementation Covenant:

(a) With respect to the implementation of the Ethnic Minority Cultural Heritage Protection component, Guizhou shall cause a Community Project Management Group and a Village Supervision Group to be established at each of the selected minority villages by September 15, 2009, with terms of reference, staffing and other resources acceptable to the Bank, as set out in the Operation Manual for Community Participation (OMCP).

Key Implementation Covenants:

(a) Guizhou shall: (i)carry out, and cause to be carried out, the project in accordance with the OMCP; and (ii)furnish to the Bank for its prior approval any proposed amendment to the provisions of the OMCP and, thereafter, put into effect only such amendments as shall have been agreed with the Bank.

(b) Guizhou shall cause the project participants to implement Guidance No. 30 of 2007 issued by the Guizhou Provincial Party Commission and the Guizhou Provincial Governemnt on November 28,2007, on safeguarding interests of ethnic minorities and their cultural heritage in the development of rural tourism and ensuring that ethnic minorities receive the benefits from tourism development. I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Guizhou Province is located in southwest China and has a total population of about 39.5 million. The province has one of the largest ethnic minority populations in China with 14 million, or 3 8% of the population, belonging to 49 different ethnic groups. The Miao people form the largest minority group with 4.3 million, followed by the Buyi at 2.8 million and the Dong at 1.6 million. Over 90% of the province’s total land area is mountainous. The difficulties posed by this landscape have led to inadequate infrastructure and low levels of outside investment. The landscape has constrained overall development, particularly in rural areas. About 15% of Guizhou’s villages are still inaccessible by road, 27% of the village population is not connected to an electrical grid and the average rural per-capita income is only 27% of that of the province’s urban areas.

2. Although underdeveloped, Guizhou is richly endowed with cultural and natural resources. The minority villages have unique, centuries-old traditions including ethnic heritage architecture, cultural landscapes, and living traditions of song, dance, crafts, and festivals. Natural resources include karst landscapes, gorges, rivers, rapids, caves, and pre-historic fossils. These rare cultural and natural heritage assets represent an attraction of immense appeal to both domestic and international tourists.

3. Guizhou’s recent Five-Year Plan seeks to increase the pace of tourism development, particularly rural tourism, as a key means of economic restructuring and poverty alleviation. Based on the Tourism Development Master Planfor Guizhou, which was prepared in 2002 by the United Nations World Tourism Organization with financial support from the World Bank, the Guizhou Provincial Government (GPG) has formulated policies and plans that pursue sustainable tourism development and poverty alleviation through a number of approaches. These include: development of tourism resources; protection of natural and cultural heritage; vocational and professional training; and promotion of domestic and foreign investments in the sector.

4. Guizhou’s tourism development efforts have been increasingly successful over the past few years. Its total tourism income has grown by over 30% for six consecutive years since 2000. Tourism has become a pillar industry in Guizhou. However, this rapid growth has exposed structural weaknesses in the implementation of the current tourism strategy and presented challenges for the conservation and sustainable development ofthe province’s heritage assets. The following issues, among others, need urgent attention if tourism is to be a sustainable means of poverty reduction for Guizhou Province.

5. Inadequate Basic Inpastructure. Many of Guizhou’s minority villages, ancient towns, and parks lack basic infrastructure such as roads, footpaths, water and power supply, sanitation, and solid waste management systems. Investment in basic infrastructure is therefore critical, not only for the sustainable development and protection of heritage sites, but also for raising local standards of living, developing facilities required by visitors, and creating opportunities for local economic development. There is a particular need for investment to be based on appropriate technology - low-cost, efficient, and easy to operate and maintain.

1 6. Insuficient Attention to Heritage Protection and Preservation. While the central and provincial governments have well-articulated institutional and legislative frameworks to protect cultural heritage, both tangible and intangible as well as natural heritage, many of these laws and regulations are poorly understood and implemented at the local level.

(a) Built Heritage. The traditional buildings and streetscapes of Guizhou’s ancient towns and villages are at risk from the intrusion of incompatible development, a lack of adequate maintenance and substandard conservation measures. Compliance with conservation regulations, as well as the development of community-level support for conservation plans, is essential to maintain the value of Guizhou’s built heritage.

(b) Intangible Heritage. The traditional forms of life styles, including customs and productivity in Guizhou’s minority villages are continually evolving as residents become increasingly mobile, tourists introduce new influences and communities strive to improve their standard of living. A sustainable model for safeguarding intangible heritage requires: (i)research and documentation ofpast and present intangible heritage; (ii)community appreciation of the importance of heritage for social capital and cohesiveness; (iii)economic development based on intangible heritage (e.g. cultural tourism); and (iv) the integration of communities’ changing practices and priorities into the definition oftheir intangible heritage.

(c) Cultural Landscapes’. Generally, Guizhou’s cultural landscapes retain their character and integrity, but they remain highly susceptible to a wide range of agents of change including tourism and economic development. Compiling inventories, documentation, monitoring, and effective management of cultural and natural landscape resources will be critical to avoid losing this asset.

(d) Natural Heritage and Parks. Limited budgets, a lack of conservation expertise and poor management skills have left Guizhou’s natural heritage and parks vulnerable to damage from overuse, theft, vandalism, and the elements. To develop a sustainable system which can cope with the expected level of tourist development, parks will require adequate conservation, management systems, and protective measures.

7. Lack of Community Involvement. In the past, government initiatives have usually used a “top-down” approach for planning and decision making, which has not generated sustainable development at the local level. Stronger community involvement in project planning, especially heritage conservation and tourism development, must be implemented to ensure that local communities commit to the successful implementation ofproject activities. This involvement will maximize their economic benefits and ultimately maintain the long-term health of their cultural and natural heritage.

8. Inappropriate Tourism Planning and Management. Tourism operators and site managers in Guizhou have limited experience with long-term destination management, international

’ Cultural Landscapes have been defined by the World Heritage Committee as distinct geographical areas or properties uniquely “representing the combined work of nature and of man.” Through their form, features, and the ways they are used, cultural landscapes reveal much about man’s evolving relationships with the natural world.

2 tourism standards, and the expectations ofincreasingly sophisticated domestic tourists. Many of Guizhou’s tourism leaders have yet to conceive oftourism as a multi-sectoral, dynamic system that goes beyond individual sites and involves a network oftransportation, hotels, shopping, restaurants, entertainment and tour operators. Consequently, there is a significant need to enhance understanding ofthe tourism sector and promote cooperation among all its actors.

9. Absence of Income Generating Opportunities. Despite the recent growth ofunplanned tourism in Guizhou, economic benefits are not yet significantly accruing to local communities. The lack ofemployment and business opportunities in traditional villages and ancient towns has resulted in migration ofyoung people to nearby urban areas and provinces. This has left behind local populations ofmostly women, children, and the elderly. A continuation ofthis trend will eventually create non-viable communities and undermine the conservation ofcultural heritage. While some community members have developed small entrepreneurial activities connected to tourism, many ofthese efforts are ofvery low quality, provide only small income and lead to over supply, excessive competition, and repetitious goods for sale. Careful evaluation of potential income earning opportunities and training will be required to mitigate this situation.

B. Rationale for Bank involvement

10. This project provides the Bank with the opportunity to address poverty and development issues in the least developed province ofChina, using the area’s rich tourism resources as the primary means. It also allows the Bank to support the conservation of cultural and natural heritage assets for future generations. The Bank’s participation can provide the GPG with financing to conduct heritage protection and development in many minority villages, which would subsequently realize maximum benefits from this project.

11. An important feature ofthe project is the adoption ofthe community-based development (CBD) approach for the project goals, which are to protect cultural heritage and to generate local income. The CBD approach involves special skills training and capacity building for minority villages. The communities, therefore, make the decisions and implement the small projects, and eventually receive the benefit directly.

12. The Bank will bring to the project extensive global experience in natural and cultural heritage protection, sustainable tourism development, and rural economic development. Lessons learned from similar projects in Eastern Europe, South and Central America, Africa and Asia will be applied to the project.2 The Bank will also draw on many insights gained from firsthand experiences in China, which include: conservation planning activities at the Leshan Grand Buddha in Sichuan; Chongqing’s Huguang Huiguan; the historic city center of Shaoxing; rehabilitation and conservation work at the Imperial Palace and Ming dynasty tombs in Shenyang; and Gansu Province’s similar project for cultural and natural heritage protection and development.

~ ~ * Projects include the Macedonia Community Development and Cultural Heritage Project, the Copan Valley Regional Sustainable Tourism and Cultural Heritage Project, the Nias Livelihoods and Economic Development Program, and the Ethiopia and Tunisia Cultural Heritage Projects.

3 13. The project will further strengthen the collaborative relationship between the World Bank, the State Administration for Cultural Heritage (SACH), the Ministry of Construction, and other Chinese authorities. International conferences in Beijing (2000) and Shaoxing (2006) have allowed all parties to disseminate the best practices (whether international or Chinese) for heritage protection and sustainable tourism development.

C. Higher level objectives to which the project contributes

14. The project is consistent with China’s 1lth Five-Year Plan, especially the high priority placed by the central government on the improvement of cultural heritage preservation. The government’s strategy in this regard is articulated in the State Council’s Notice on Strengthening Cultural Heritage Protection, which was issued in 2005, and which requires substantial progress to be made by local governments in the protection of cultural heritage before 20 10. In addition, the project is consistent with two strategic pillars in the Country Partnership Strategy (CPS) 2006-2010. To address the CPS strategy of “Reducing Poverty, Inequality and Social Exclusion,” the project will target extremely poor and ethnic minority communities for economic development and poverty reduction. The project will address the second strategy of “Managing Resource Scarcity and Environmental Challenges” by providing technical assistance and strengthening institutions. This will help protect and manage the province’s irreplaceable cultural and natural resources.

15. In the Results Matrix of the CPS, the development goal of “Managing Resource Scarcity and Environmental Challenges” includes a clause to “protect cultural and natural heritage and promote cultural- and eco-tourism.” The CPS also supports the development of demonstration tourism sites, an increase in the number of listed heritage sites, and the activation of environmental protection measures. The project, as designed, will contribute to these goals. The project will also address additional goals found in the CPS. These include: providing basic infrastructure services (water supply, solid waste management, drainage and road upgrading); increasing the capacity of villages for planning and management; and focusing on sustainable income increases for the poor.

11. PROJECT DESCRIPTION

A. Lending instrument

16. The lending instrument is a Specific Investment Loan. The loan will be a single currency, variable spread loan of US$60 million, with a maturity of 30 years, including a five-year grace period and a front end fee of 0.25%.

B. Program objective and phases

17. Not applicable.

4 C. Project development objective and key indicators

18. The project development objective is to assist Guizhou Province in increasing economic benefits to local communities (including minority groups) through increased tourism and better protection of cultural and natural heritages.

19. The objective would be achieved through the following: prioritized and sustainable investments in infrastructure; initiatives to enhance incomes of the ethnic population; special attention to the protection and development of natural and cultural heritage; and capacity building for tourism development and heritage protection.

20. Outcome indicators for the project are detailed in Annex 3. The indicators focus on achieving the project development objective of increasing economic benefits to local communities, as well as cultural and natural heritage protection and development, and sustainable tourism management. The key outcome indicator is "average per capita income in project minority villages".

D. Project components

2 1. The project is designed to: protect and preserve cultural and natural heritage assets; improve basic living conditions by upgrading infrastructure facilities; increase employment and incomes for residents of minority villages; improve facilities for tourists; and support project management and capacity building for sustainable tourism management. The four components are summarized below and a detailed description of each component is also found in Annex 4, including details of activities in individual project villages.

(a) construction of small scale infrastructure facilities to serve the villages and towns;

(b) rehabilitation and conservation of unique historic buildings and construction or establishment of cultural and visitor centers;

(d) carrying out of income generation activities that preserve and protect intangible cultural heritage for provision of technical assistance, training and goods.

5 National Scenic Park in Qianxinan Prefecture; and (d) Shanmu River Scenic Park in Qiandongnan Prefecture, including construction andor rehabilitation of pedestrian roads, public toilets, water supply and sanitation facilities, signage, and tourist service centers, and implementation of measures for environmental and ecological protection of such parks.

Component 3: Tourism Gateway Town Facilities Development (USN6.34 million), consisting the following:

Component 4: Capacity Building and Project Implementation Support (US$1.81 million), consisting the following:

(b) strengthening of capacity and capability in the tourism sector: (i)at the county level through the provision of goods and technical assistance to Project Management Offices (PMOs); and (ii)at the provincial and local levels through provision of training for staff of PMOs, Project Implementation Units (PIUs), and provincial and local government tourism administrative units; and

(c) reviewing and updating of the Guizhou Tourism Development Master Plan to align its strategies to current circumstances, including improved access of tourism sites to highways; and development of design guidelines for the Conservation oftraditional buildings and traditional environments in minority villages.

E. Lessons learned and reflected in the project design

22. The Bank has gained experience in the support of heritage conservation and tourism development through a series of projects in China over the past 16 years. In addition, an analysis

6 of the cultural heritage sector entitled Management of Urban Cultural Heritage in China: A Sector Overview, has provided key lessons that have been incorporated into the project de~ign.~

23. Heritage Conservation Practices. Some local officials and practitioners in China follow heritage conservation practices which are outdated, and employ lower standards than the best practices either currently mandated by Chinese law or recommended by international organizations. To encourage better practices, project activities will emphasize compliance with all state, provincial and prefecture laws and standards for heritage protection. In addition, the project will advocate the use of Principles for the Conservation of Heritage Sites in China, which is a set of guidelines issued by China’s SACH, as well as the China Chapter of the International Council on Monuments and Sites (ICOMOS).4

24. Land Use Planning. Past project experience indicates that authorities in China would benefit from more assistance with planning so as to develop plans that address the impact and trade-offs among different land use categories. Due to a lack of appreciation for these trade-offs, local officials and planners often incorporate inappropriate development near traditional villages and heritage sites which is inconsistent with heritage protection laws, diminishing the value and significance of these sites. During early project implementation, these issues will be addressed by screening plans and if necessary, they will be improved to ensure consistency with the project’s objectives and China’s laws.

25. Appropriate Infiastructure Design. Bank-financed infrastructure projects in China have shown a tendency toward infrastructure that is larger or more technical than is necessary or appropriate for the situation. This has occurred largely due to the absence of demand projections and an inadequate understanding of the community’s ability to operate and maintain the facilities. Extra scrutiny was given during project preparation to ensure that project infrastructure represents: (a) the realistic level of community demand; (b) technology appropriate for rural conditions; (c) local capacities for operation and maintenance (O&M); and (d) lowest cost.

26. Sustainable Tourism Development. Recent observations of China’s tourism sector suggest that the requirements of sustainable tourism development are not well understood. Moreover, the negative impact that tourism can have on traditional villages and ancient towns and their social fabric is not fully appreciated. Experience from the World Bank’s global engagement on tourism development has shown that project activities must focus on: (a) raising awareness and capacity building for communities and tourism development officials; (b) cultural tourism market research and analysis; (c) appropriate cultural tourism activities and interpretation; (d) delivering maximum benefits and minimum costs to communities; and (e) cooperation, rather than competition, among local tourist destinations.

27. Community Participation and Bene& Previous projects in both heritage and environmental conservation have established the importance of involving communities during the planning phase, in order to maximize benefits and engage their support for conservation. The

World Bank, 2005. Management of Urban Cultural Heritage in China: A Sector Overview. Working Paper No. 2, Urban Development Working Papers, East Asia InfiastructureDepartment. Washington D.C. Available on the China ICOMOS website (http://www,icomoschina.org.cn).

7 project will focus on bringing benefits to the community through: (a) the strengthening or formation of representative village organizations to establish village-level consensus on organization, management, and conflict resolution for tourism development; (b) awareness raising on the importance of cultural heritage for social and economic development; (c) provision of basic infrastructure services (e.g. water and sanitation and road improvements) in target communities; and (d) skills training in income-generating activities (e.g. restaurants, guest houses, performances, and souvenir production).

28. ExperienceJi.om China Cultural Heritage and Tourism Projects. Many of the lessons described above have come from experience in developing the recently-approved Gansu Cultural and Natural Heritage Protection and Development Project. Additional lessons from Gansu that have been incorporated into this project include: (a) the positive potential for partnerships and cooperation with state-level agencies; (b) the challenges related to China’s institutional and legal frameworks for heritage protection; and (c) the level of capacity for physical and economic planning related to heritage sites. Other project experiences in China that have been used include conservation and development of the Huguang Huiguan complex under the Chongqing Urban Environment Project, and the Leshan Buddha site under the Sichuan Urban Environment Project.

29. To address the issues of sustainable tourism development, the project will make use of the lessons learned in the development of cultural heritage tourism activities in Gansu and Shaoxing and Ningbo under the Zhejiang Urban Environment Project. The project has made use of information developed on: (a) the organization and capacity of the tourism sector in China; (b) the growth and composition of the domestic and international tourist demand; and (c) the challenges faced by government, the private sector, and local residents in maximizing benefits from tourism development.

F. Alternatives considered and reasons for rejection

30. Geographic Coverage. The GPG originally proposed that the project cover all of the province’s municipalities and prefectures. This would have involved a vast area, comprising over 100 sites. Such a program would have been unaffordable by the GPG, and difficult to manage and supervise for both the GPG and the World Bank. After detailed discussions, the GPG and the Bank agreed to focus on a few key districts where the biggest impact could be made in: (a) poverty reduction, by focusing on areas with the greatest concentration of poverty; (b) demonstration purposes, by choosing an illustrative range of cultural and natural sites; and (c) effective implementation and supervision, by concentrating resources on a smaller number of sites. These considerations limited the project’s geographic coverage to a smaller number of project sites in Anshun Municipality, and Qiandongnan and Qianxinan Prefectures.

3 1. Tourism Development Companies. A government proposal was made to create government-owned or privately-owned tourism companies in minority villages. These would have been companies with the capacity to borrow and repay project funds. This proposal was rejected because the villagers would have had little input or control in any of the activities, the companies would be driven by profit, and the overall process would not give priority to the needs and interests of the communities.

8 32. Models for Community Participation. Three alternative models were considered to give the ethnic communities, the owners ofthe cultural heritage, a larger role in the decisions affecting the communities. These were: (a) community-driven development (CDD) model that requires passing all funds to the communities for them to decide on potential interventions; (b) CBD model that enables them to make all decisions on the interventions, but with control of funds; and (c) mere consultations on proposed interventions. The CDD model was considered to have too many fiduciary risks due to the weak capacity that exists at all levels and also because ofissues relating to monitoring the proper use ofproject funds. The option that allowed consultation alone was considered to be not adequate. Hence, the CBD model was selected.

33. Balance Between Infrastructure, Heritage, and Tourism. The early proposal for project investment was driven by tourism bureau priorities, rather than village priorities, and emphasized infrastructure construction. However, following in-depth discussions on the project goals and the means by which these goals could be achieved, priorities shifted. More emphasis has been placed on the community participatory approach, intangible heritage conservation, guidance on appropriate cultural tourism, and measures to generate more income and benefits for poor ethnic minorities.

111. IMPLEMENTATION

A. Partnership arrangements

34. The proposed project is a free-standing project and does not have any other international co-financiers.

B. Institutional and implementation arrangements

35. Project Management. The Guizhou Provincial Project Leading Group, headed by the Vice Governor ofGuizhou Province, has been established to provide policy, financial, and institutional guidance on the project.

36. The Guizhou Provincial Project Management Office (PPMO) has been established under the Guizhou Provincial Tourism Bureau (GTB) for overall project coordination and management. The PPMO will be responsible for developing annual work plans, preparing consolidated project progress and financial reports for Bank review, and monitoring overall implementation progress and project impacts.

37. PMOs have also been established in the municipal/prefectural and county-level tourism bureaus. These PMOs will be in charge ofguiding and managing the preparation and implementation ofproject subcomponents under their jurisdiction and coordinating day-to-day activities with the PPMO. The county-level PMOs will have the overall responsibility to manage implementation ofvillage-level activities, and be directly responsible for the implementation of the grant programs for private house conservation and rehabilitation and intangible heritage protection and preservation (items (c) and (d) ofthe Ethnic Minority Cultural Heritage Protection component).

9 3 8. Project Implementation. PIUs have been established at the component or subcomponent level. The PIUs are mainly prefectural and county-level tourism bureaus. The PPMO and the Guizhou Normal University (GNU) will be responsible for implementing the Capacity Building and Implementation Support component and the Guizhou Cultural and Natural Heritage Protection and Development Center subcomponent, respectively.

39. Eleven subcomponents in 17 minority villages under the Ethnic Minority Cultural Heritage Protection component will be implemented through the CBD approach. The county- level PMOSwill have overall responsibility for fund management and procurement, while the minority villages will decide upon and implement all village-level activities, including the selection of: infrastructure packages; rehabilitation and conservation of unique and historic traditional buildings; and beneficiaries for grant programs for rehabilitation and conservation of private houses, and intangible cultural heritage protection. A representative village organization in each village - the Community Project Management Group (CPMG), will be the main agency to coordinate activities in the village. The CPMG will identify and determine each activity to be carried out in the village through a process of consultation with villagers to reflect their needs and priorities. Other organizations at this level are the Village Committee and the Village Supervision Group (VSG). Below this layer are the Village Implementation Groups (VIGs). Prior to project implementation, villagers will be organized into different VIGs, such as Village Tourism Association, Construction Team, Arts and Crafts Association, and Senior Citizens Association based on the needs of each village. To provide support the efforts of the villages, the project will provide: community coordinators/facilitators for community mobilization and guidance, and technical specialists to help develop designs for conservation of traditional buildings and environments in minority villages. This organizational arrangement would ensure maximum community participation in project activities, and technical support to villages. Details of the CBD approach are described in the Operation Manual for Community Participation (OMCP). Detailed implementation procedures are also described in Annex 15.

40. Technical Guidance. The Tourism Development Expert Committee has been established to assist in the preparation and implementation of the project through technical support and guidance. The committee is composed of Guizhou’s scholars and government officials with technical expertise related to the project, such as cultural heritage protection, planning, engineering, and poverty alleviation.

41. Fund Flow. The proposed loan of US$60 million will be made to the People’s Republic of China. The loan proceeds will flow from the Bank into a project designated account, which will be established at and managed by the Guizhou Provincial Finance Bureau (GFB). The GFB will pass on the loan proceeds through the municipal/prefectural finance bureau to: (a) county financial bureaus, which will implement the subcomponents in minority villages, scenic areas, and natural heritage sites; (b) the GNU, which will implement the Guizhou Cultural and Natural Heritage Protection and Development Center subcomponent; and (c) the PPMO, which will implement the Capacity Building and Project Implementation Support component. Following internal arrangements, each county government and the GNU will be responsible for repaying their respective loans to the GFB. Guizhou Province will be responsible for repaying the Bank loan.

10 C. Monitoring and evaluation of outcomes/results

42. Key outcome indicators for the project development objective, as well as for three project goals - cultural heritage protection and development, natural heritage protection and development, and sustainable tourism management - are found in Annex 3. The prefecture- and county-level tourism bureaus, the county-level PMOS, and the CPMGs under the project will regularly collect the data necessary to monitor and evaluate the outcome indicators. The PPMO will work closely with these organizations to consolidate the data in progress reports and update the Results Framework as necessary. The data will be collected through: (a) progress reports; (b) annual community surveys for the minority villages; (c) village account records; and (d) registry information at the gateway town tourist information centers.

D. Sustainability

43. The GPG is firmly committed to tourism development as the vehicle for economic development and poverty alleviation in Guizhou Province, especially in minority communities. With the assistance ofthe World Bank and the World Tourism Organization, the GPG has developed the Tourism Development Master Plan, which focuses on rural tourism. The GPG’s policies and development plans deem it necessary to: develop tourism facilities; protect natural and cultural heritage assets; provide financial support; improve infrastructure in minority villages and ancient towns; improve tourism-related skills within communities; encourage tourism- related services and businesses; and promote domestic and foreign investments in the sector. Municipal/prefectural and county governments in Guizhou view tourism as the key to local economic development. The project’s technical assistance inputs will help build-up the capacities of the provincial and county-level tourism bureaus (and village organizations) in the following fields: tourism planning, development, and marketing, hospitality service standards, and business planning and development.

44. The adoption of the CBD approach empowers communities and assures ownership. Communities will be involved in the decision-making, implementation, and monitoring of all activities, as well as the identification, interpretation, and protection of their heritage assets. This approach strengthens the communities’ awareness of the importance of heritage assets. It also assigns to them the responsibility of protecting and preserving the assets for long-term sustainability .

45. Under the project, the villages will receive assistance from community coordinators/facilitators and technical specialists, who will facilitate community mobilization and provide technical advice to: develop conservation plans; restore traditional buildings in accordance with project guidelines; maintain the overall visual integrity of the traditional village environment; and select appropriate infrastructure that is easily maintainable and meets high conservation standards.

46. The infrastructure and facilities constructed in the minority villages will be owned and maintained by the villages. The government will provide funds for O&M of facilities at the scenic and natural heritage sites. Improvement and expansion of basic village infrastructure will ensure that the increased need for sanitation and solid waste management (created by rising

11 numbers oftourists) will be handled in a sustainable manner. Fire safety measures - including education, firefighting equipment, and inspection of electrical installations - are included in the project to protect heritage buildings and landscapes.

E. Critical risks and possible controversial aspects

To project development objecti ?S Loss of minority villages’ Provide minority villages with Modest values and an increase in information on the likely impacts of social problems tourism development and other outside forces.

0 Guide minority villages to participate, discuss, and agree on the amount and type of change and tourism development. Inappropriate development at Screen physical and cultural heritage Modest cultural and natural heritage protection plans for consistency and sites suitability prior to infrastructure investments. Conduct workshops/seminars to raise awareness of local government and PMO officials.

Inadequate or inappropriate 0 Monitor and supervise each village to Modest conservation at cultural and ensure that appropriate architectural natural heritage sites guidelines are being followed. Engage local craftsmen or qualified specialists in conservation work.

0 Conduct workshops/seminars to raise awareness of communities on appropriate heritage protection and conservation.

Exclusion of minority villages 0 Prepare and adopt appropriate Substantial from sharing the benefits of regulations to safeguard the interests of tourism development ethnic minorities by the GPG.

0 Use a participatory approach to ensure village needs and priorities are being funded. Lack of senior leadership and Secure agreements with the GPG to Substantial commitment to provide ensure sufficient financial and human sufficient financial and human resources before implementation. resources

12 To component outputs/results

Influence of majority 0 Require, by state and provincial Low community at the county and regulations, that officials dealing with PMO level on interventions in minority matters be from the same minority villages. minority group.

0 Use the CBD approach to ensure that interventions in minority villages are decided bv communities.

Lack of counterpart funding to 0 Confirm commitment from municipal Substantial implement the project as and local finance bureaus for timely scheduled. payment of counterpart funds. 0 Provide Bank financing ofabout 70%.

Weak implementation and 0 Provide support for project Substantial management capacity of implementation and management.

PMOs 0 Conduct capacity-strengthening training for PMO staff.

0 Conduct regular supervision by the Bank to address issues in a timely manner.

Failure to use loan proceeds 0 Control and regularly monitor Substantial for the intended purposes counterpart funding, expenditures, and loan funds, especially at the country level.

0 Conduct frequent financial management reviews.

0 Refuse to fund proven irregularities. Noncompliance with social Prepare annual monitoring and Modest and environmental safeguards evaluation reports on environmental and social safeguards. Conduct regular safeguard supervision by international and domestic specialists.

Slow procurement process due 0 Provide technical assistance for Substantial to insufficient experience and procurement and supervision on a regular knowledge of PMOS and PIUs basis.

about procurement and Bank- 0 Provide PMOs and PIUs with financed projects procurement training.

0 Ensure that the Procurement Manual and the OMCP will be followed for project imdementation. Overall Risk Rating Subs tantial * Gbility that an outcome will not be achieved: High >75%; Substantial >50%; Modest 25%; LOW <25%

F. Loadcredit conditions and covenants

47. The following covenants are included in the Project Agreement:

48. Loan Effectiveness Condition: There is no loan effectiveness condition.

13 49. Dated Implementation Covenant:

With respect to the implementation ofthe Ethnic Minority Cultural Heritage Protection component, Guizhou shall cause a CPMG and a VSG to be established at each ofthe selected minority villages by September 15,2009, with terms ofreference, staffing and other resources acceptable to the Bank, as set out in the OMCP.

50. Key Implementation Covenants:

(a) Guizhou shall: (i)carry out, and cause to be carried out, the project in accordance with the OMCP; and (ii)furnish to the Bank for its prior approval any proposed amendment to the provisions ofthe OMCP and, thereafter, put into effect only such amendments as shall have been agreed with the Bank.

(b) Guizhou shall cause the project participants to implement Guidance No. 30 of2007 issued by the Guizhou Provincial Party Commission and the GPG on November 28,2007, on safeguarding interests ofethnic minorities and their cultural heritage in the development ofrural tourism and ensuring that ethnic minorities receive the benefits from tourism development.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

5 1. Economic Analysis. This project will bring various economic benefits to both local residents and tourists through local economic development. Income will increase due to tourism activities, enhancement oflocal skills, protection and development ofcultural heritage, conservation ofnatural ecosystems, improvement ofliving standards and environmental health in ethnic minority areas, and strengthening oflocal institutions. Some ofthese economic benefits will come as direct use value for tourists and local residents, such as their enjoyment ofcultural heritage. Some are indirect, such as the ecological and environmental improvements provided by natural heritage preservation.

52. The economic valuation ofthe project, however, is a challenge. This is due to the nature ofthe heritage, which is priceless, and the uncertainty about the number offuture tourists. Economic valuation also depends on how much the project contributes to increasing revenue at the project sites, some ofwhich have already become tourist destinations. All ofthese factors are difficult to determine exactly. A mix ofa cost-effectiveness approach and a cost-benefit analysis was therefore used for the economic analysis.

53. A cost-effectiveness approach was used to ensure that least-cost options are adopted to achieve the development goals. Guidelines for least-cost options were therefore followed while designing most ofthe investment components, especially those that provided basic infrastructure for heritage protection and tourism development. The guidelines recommend technical design ideas and alternatives, such as different construction materials, technical standards (e.g. the width ofaccess roads and hiking trails), or technologies (e.g. types ofwastewater treatment methods and public toilets). By weighing the alternatives, the design process will select the least-cost

14 option for construction. Additionally, a cost-benefit analysis was performed on several selected project sites - a scenic park area, a Miao ethnic minority village, a Dong ethnic minority village, and an ancient town - to further examine the economic justification ofeach site. The results should illuminate the economic viability ofthe entire project.

54. The analysis quantifies only the direct use benefits to visitors and local residents. Other benefits might also be important, but are not included due to data and time limitations in the analysis. In the cost-benefit analysis ofthe four selected project sites, tourists and residents completed surveys about their willingness-to-pay for cultural preservation, in order to quantify this extra economic value to them. These economic benefits were quantified based on conservative projections oftourist growth at the site.

55. Each individual site had a different economic internal rate ofreturn (EIRR). This ranged from 13.7% at Anshun Jiuzhou Ancient Town to 19.6% at Langde Upper Miao Village. The variation is due primarily to the different nature and size of investments at the different sites. All ofthese have an EIRR above the Government ofChina’s acceptable threshold, i.e. the 8% discount rate for investment projects, recommended by the National Development and Reform Commission in 2002. It is likely that the result of the economic analysis is at the low end of estimation, but can still economically justify the project. Sensitivity analysis - which assumes a 10% reduction in the number ofvisitors and a 10% increase in investment costs - shows that the analysis remains robust.

56. The project will improve the condition of local infrastructure and bring economic and health benefits to the entire population (including the poor) in the project areas. To ensure that the project revenue will be shared fairly among local residents, a CBD approach will be employed in project implementation. Accordingly, the project anticipates no negative impact on the poor.

57. Financial Analysis. Given the nature ofthe project, i.e. the private sector only is unable to ensure the preservation of heritage sites and assets and the equitable distribution ofbenefits to the public, municipal financial analysis was carried out for the project municipality and prefectures.

58. For all the project municipality and prefectures, the counterpart financing and loan repayment are considered to be well within the fiscal capabilities oftheir governments and thus have little impact on their finances. In addition, given the municipality and prefectures will receive transfer payments from the central government, their financial resources will be adequately secured for the project.

B. Technical

59. Factors considered in the provision of infrastructure in minority villages are described below. Similar considerations were used in the provision of infrastructure facilities at scenic areas and natural heritage sites: (a) infrastructure options selected had the least cost and were easily maintainable by minority communities; (b) infrastructure caused minimum environmental impact to the minority villages; (c) vehicular access to the village was limited to the main access

15 route (i.e. one main spine road); (d) concrete pavement or structures were avoided in favor of traditional local materials; (e) parking for tour buses or other visitors was located outside the village entrance; (f) adequate sanitary facilities were provided to meet the demand and standards of domestic and foreign visitors (this includes appropriate technologies such as septic tanks, stabilization ponds, double pit flush latrines, and biogas disposal systems); and (8) simple, but appropriate, solid waste collection systems were selected, including arrangements for disposal at the nearest landfill.

60. Proposals for rehabilitation and conservation of traditional buildings and individual houses ensured the following: (a) designs conformed to traditional architectural styles; (b) workers used only local traditional building materials; (c) rehabilitation and conservation methods were easily replicated by villagers; (d) adequate measures to reduce fire risks were incorporated; and (e) the least-cost method was chosen.

C. Fiduciary

6 1. Financial Management. An assessment was carried out on the adequacy of the financial management systems for the project. The assessment, based on guidelines issued by the Financial Management Sector Board on November 3,2005, concluded that the project meets the minimum Bank financial management requirements, as stipulated in BP/OP 10.02. Taking into account the risk mitigation measures proposed under the project, the financial management risk rating is assessed as ‘substantial.’

62. Procurement. A procurement capacity assessment was carried out and found out that the capacities available at the county government level are weak. The overall procurement risk rating is thus assessed as ‘high’. Based on this assessment, recommendations were made on the appropriate threshold for prior review and on measures to strengthen the PIUS’procurement management capacities. Procurement for this project will be carried out in accordance with the World Bank‘s Guidelines: Procurement under IBRD and IDA Credits, May 2004, as revised October 2006 (the Procurement Guidelines) and Guidelines: the Selection and Employment of Consultants by the World Bank Borrowers, May 2004 as revised October 2006 (the Consultant Guidelines) and the provisions stipulated in the Loan Agreement.

D. Social

63. Social Benejt. The project aims to facilitate the sustainable development of Guizhou’s cultural and natural heritage, and is therefore expected to deliver positive benefits by improving preservation and conservation of the heritage. The project will instill a commitment to, and practical experience of, sustainable approaches to tourism development among the government and the public in Guizhou. This will ultimately enhance cultural heritage appreciation, environmental sustainability, and the economic development of isolated populations. Social and economic benefits can be realized by increasing the number of tourists to accelerate the service industry’s development. Economic development (driven by tourism) will increase job opportunities and enhance incentives for the protection of cultural and natural heritage.

16 64. Land Acquisition and Resettlement. Resettlement impacts will be limited. In most cases, land needed for the village project will be obtained through land adjustments or donations. Facilities built under the Natural Heritage and Scenic Site Protection and Development and Tourism Gateway Town Facilities Development components will in most cases use empty state- owned land. Only one village involves housing demolition according to the provincial plan for cultural heritage preservation. A consolidated Resettlement Action Plan, including a Resettlement Policy Framework, has been developed in compliance with OPBP 4.12 Involuntary Resettlement, and the relevant domestic policies.

65. Ethnic Minorities. Social assessment has been carried out. The majority ofthe project’s beneficiaries are minorities, and three minority groups - the Miao, Dong and Buyi - will be affected. The affected minority groups were consulted during project preparation and the OMCP has been prepared.

E. Environment

66. One ofthe project objectives is to contribute to the overall improvement ofthe environment in the project areas by creating the basis for long-term protection and management ofheritage. More specifically, the project investments will improve the environmental conditions within project sites by using rehabilitation and conservation works such as landscaping and by upgrading and paving access roads and footpaths. The environmental impacts oflocal residents and tourists will be mitigated through the provision ofkey environmental services. These include sanitation, solid waste collection and disposal, power supply, storm drainage, water supply, and wastewater management. The environmental impacts oftourists will also be reduced by providing fences, pathways, and tourist service centers, all ofwhich will reduce the possibility of improper site use by visitors.

67. Environmental Assessment. The project is classified as a Category A project under OP/BP4.0 1 Environmental Assessment (EA). This is because some proposed subcomponents are located in sensitive areas with significant cultural relics or natural environments, although most of them are simple and have a small investment scale. Furthermore, this classification was primarily based on the importance ofsites, rather than the potential impacts ofthe individual project investments. The environmental safeguard documents - EA report, Environmental Management Plan, and EA summary - have been prepared on the basis of China’s legal and policy frameworks for pollution control and environmental protection, project master plans, and conservation plans, as well as applicable World Bank safeguard policies. The environmental safeguard documents have applied the relevant methodologies as set out in various technical guidelines issued by the former State Environmental Protection Administration, which is currently the Ministry of Environmental Protection, and also in technical sourcebooks/safeguard policies fiom the World Bank. The scope ofthe project covered by the EA report is based on the feasibility study reports for the project components. In addition to the environmental safeguard documents mentioned above, a Strategic Environmental Assessment was conducted by international consultants, which evaluated three ofGuizhou’s plans - the economic development plan, the cultural and natural protection and development plan, and the tourism development plan - from an environmental perspective,

17 F. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPiBP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OPiBP 4.1 1) [XI [I Involuntary Resettlement (OPiBP 4.12) [XI [I Indigenous Peoples (OPiBP 4.10) [XI [I Forests (OP/BP 4.36) [I [XI Safety of Dams (OPiBP 4.37) [I [XI Projects in Disputed Areas (OPiBP 7-60). [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI

G. Policy exceptions and readiness

68. The project requires no exceptions from Bank policies. The project also meets all key readiness criteria. The capacity of PMOs, PIUs, and participating minority villages is the key to successful project implementation; however, it is considered to be relatively low. Training and capacity building programs, as well as implementation support will be thus provided throughout project implementation to mitigate any possible project risks to which it might lead.

* By supporting theproposedproject, the Bank does not intend to prejudice thejnal determination of the parties' claims on the disputed areas

18 Annex 1: Country and Sector or Program Background CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

1. Guizhou Province is located in southwestern China. The province has a population of approximately 39.5 million, ofwhich about 38% belong to 49 ethnic groups. Guizhou’s ethnic minority population is about 14 million - the highest number for any province except Guangxi and Yunnan. Many ofthe ethnic groups are indigenous and live in remote rural areas with a standard ofliving that is much lower than Guizhou’s urban average. About 15% of Guizhou’s communities remain inaccessible by road, and 27% ofthe population is not connected to an electrical grid. The average rural per-capita income is only 27% ofthat in the province’s urban areas. Data from 2005 indicates that, out ofGuizhou’s 87 administrative counties and cities, the number ofnational-level poverty counties actually increased from 47 to 50. While the recent increase in tourists has brought benefits to some specific segments ofthe population, mainly those who participate in tourism-related activities, the overall benefits to minority communities have been limited.

2. Guizhou’s ethnic minorities maintain unique, centuries-old living traditions in small, rural villages. These villages consist ofextensive traditional architecture and cultural landscapes, where visitors can experience ancient traditions ofsong, dance, food, and festivals. Many traditional crafts are still practiced with great skills. These include embroidery, batik, silver smithing, and weaving. The opportunity to observe these ancient ways oflife in remote village settings represents an attraction ofimmense appeal to tourists.

3. The province also has significant natural heritage and has established nature reserves, scenic areas, and geo-parks ofgreat diversity. About 60% ofthe province features dramatic karst land formations. The most spectacular examples can be found at MaolanNational Nature Reserve in Qiannan Prefecture and Wanfenglin Scenic Area in Qianxinan Prefecture. Many deep gorges have impressive waterfalls, such as Maling River Gorge in Qianxinan Prefecture. Guizhou also has numerous ancient monuments, including temples, gates, and statues, as well as some more recent historical attractions, such as the sites associated with the Long March ofthe Red Army in the 1930s.

Government Efforts toward Tourism Development

4. Compared to the neighboring provinces of Yunnan and Guangxi, Guizhou receives fewer tourists due to its relative isolation, inadequate access roads, and poor facilities. However, the Guizhou Provincial Government (GPG) began promoting tourism in the late 1990s and the recently expanded network ofhighways and railways has significantly improved access to the region. At present, visitors are concentrated in the Guiyang and Anshun areas, with the secondary areas being Qiandongnan, Qianxinan and Qiannan Prefectures. These three prefectures have recently become attractive tourist destinations generating jobs and revenue. According to the Guizhou Provincial Tourism Bureau, about 2,600 villages in these three prefectures have attracted 10.84 million visitors, resulting in the total revenue ofRMB 2 billion, equivalent to about 8% ofthe province’s total tourism revenues. About 137,000 people were directly or indirectly employed, representing about 3 7% ofthe total tourism-related employment

19 in Guizhou. Recently, the province’s tourism marketing has been successful, with tourist arrivals in 2005 and 2006 exceeding long-term averages. Over 90% of visitors are domestic. However, the proportion of foreign visitors is expected to rise following the increased marketing, improved access, and construction of facilities. It is also expected that these improvements will encourage visitors to spend more time experiencing the local lifestyles and culture and thereby increase villagers’ incomes.

5. This recent and rapid increase in visitor numbers means that there is an urgent need for Guizhou to develop policies, protection measures, infrastructure, public awareness, and capacities to ensure that it can achieve its goals for local economic development, conservation of cultural and environmental resources, sustainable tourism development, and tourist satisfaction.

6. The groundwork for the necessary improvements for tourism development began in 2002 when the World Bank, together with the GPG and the United Nations World Tourism Organization, financed a tourism development master plan. The master plan set out a framework for coordinated sustainable tourism that includes: infrastructure development; environmental improvements; upgrading ofproducts and services; tourism management and planning; marketing; and finance and investment. Based on this master plan, Guizhou has formulated a rural tourism development plan with provincial policies and plans that pursue tourism development and poverty alleviation by generating employment, contributing to local economic development, and ensuring sustainable development through the responsible use oftourism resources in the poor national minority areas. Thus, tourism is a major element of Guizhou’s current strategy for poverty alleviation and economic restructuring. This is consistent with the Chinese Government’s 1 lth Five-Year Plan, which also gives high priority to tourism development and cultural heritage conservation.

Key Challenges for Sustainable Tourism Development

7. Improving Basic Injastructure. Many of Guizhou’s minority villages, ancient towns, and parks lack basic infrastructure such as access roads, footpaths, water and power supply, telecommunications, sanitation, and solid waste management systems. Investment in basic infrastructure is critical, not only to the sustainable development and protection of these sites, but also to creating the facilities that are required by visitors so as to increase local economic opportunities, and to raise residents’ standards of living. All basic services infrastructure supported under the project will be operated and maintained by recipient villages, towns, and parks. Given the capacity and resources available for local-level operation and maintenance, these investments should be based on appropriate technology. Solutions should be least cost, easy to operate and maintain, and functionally efficient. For example, low-cost technologies should be considered for sanitation (e.g. twin-pit toilets, communal septic tanks, lagoons, stabilization ponds, etc.). Leaders in villages, ancient towns and parks must have sufficient information to base their system choices on proven technologies, affordable operating costs, and manageable maintenance requirements.

8. Building Capacity for Tourism Planning and Management. Tourism operators and site managers have yet to conceive of tourism as a multi-sectoral, dynamic system that goes beyond individual sites and involves a network of transportation, hotels, shopping, restaurants,

20 entertainment and tour operators. Anecdotal evidence indicates that government leaders, tourism officials, park managers, and village residents have limited experience with international tourism standards or with the expectations ofdomestic tourists, who are becoming increasingly sophisticated and well-informed.

9. Of paramount importance is the need in Guizhou to improve its managerial and technical skills and resources at all levels ofthe tourism administration. Guizhou requires strategic tourism development to ensure both poverty alleviation and the sustainable use ofresources, as well as to create the tools for proper management, protection, and development ofcultural and natural heritage assets. Currently, the present course ofdevelopment is over-exploiting the assets. This will cause damage to the foundation oftourism in the long term. The main need, therefore, is to: (a) strengthen the resources and capacities at all levels oftourism administration; (b) define appropriate sources offinance to support the proper course ofaction; and (c) increase awareness ofthe importance and vulnerability ofthe province’s cultural and natural assets, especially the cultural traditions ofthe national minorities.

10. Many ofGuizhou’s minority villages, ancient towns, and parks, have suffered from a lack of resources to undertake the necessary planning for tourism development and conservation. Issues that must now be addressed include: (a) visitor flow and carrying capacity to avoid damage to heritage assets and to provide for visitors’ safety and comfort; (b) clear boundary and buffer zone demarcations and regulations to prevent encroachment and uncontrolled development; (c) identification ofnew products to increase the number ofvisitor activities and opportunities for spending; (d) environmental protection (e.g. against deforestation and erosion); and (e) business development programs to support direct benefits for local communities (e.g. site-related employment and entrepreneurial activities). To facilitate Guizhou’s tourism development there is a significant need to promote cooperation among all the relevant parties and develop tourism related knowledge, planning and infrastructure investments.

11. Increasing Attention to Heritage Protection and Conservation. While the central and provincial governments have well-articulated institutional and legislative frameworks to protect cultural heritage, many ofthese laws and regulations are insufficiently understood and implemented at the local level. Many ofGuizhou’s key cultural and natural assets are at significant risk from environmental impacts, or from theft or exploitation due to the vulnerability ofpoor rural communities. Overall, the level ofpreservation and protection has been inadequate, primarily due to a lack of financing and institutional capacity, particularly at the local level.

12. Furthermore, institutional barriers have been significant. It is often unclear who has authority over a specific relic or heritage site. In some cases there appear to be conflicting authorities in control. Frequently, tourism authorities may control the sites but are not responsible for the relics within the sites. This has led to over-building oftourism infrastructure around the relics, with little or no preservation ofthe relics themselves.

13. Another challenge for managing Guizhou’s heritage is the scope ofChina’s cultural heritage laws, which recognize relics as individual monuments rather than as clusters or landscapes. This approach is not conducive to the situation in Guizhou. For example, in some areas with multiple cultural relics, each asset is listed separately - some at the state level, others

21 at the provincial level, others below those levels. However, the site as a whole, and the connections and relationships between the relics, are not recognized by the laws. This makes it difficult for the local authorities to take a comprehensive view when managing parks, towns, or villages and their landscapes, environment, and heritage.

14. Intangible Heritage. It is widely acknowledged that the unique intangible heritage ofthe ethnic minorities in Guizhou is one ofthe province’s primary tourism assets. However, traditional forms of life styles, including productivity and customs in Guizhou’s minority villages are continually evolving as communities strive to improve their standard of living and enjoy the benefits ofeconomic progress. In communities all over the world, intangible cultural heritage is subject to adaptation and reinterpretation, especially in rapidly changing societies. Therefore, a sustainable model for safeguarding intangible heritage integrates ways ofpreserving and documenting traditions, while also reflecting the changing needs, priorities and expectations ofcommunities as they evolve. One ofthe most effective tools for developing this balance is the community-based development (CBD) approach to ensure that local communities will be fully involved in the identification, interpretation, protection, monitoring and evaluation oftheir evolving cultural assets.

15. The presentation ofintangible heritage for tourism can result in overcommercialization and the treatment ofcultural assets merely as commodities. For instance, in ethnic minority villages, tourism frequently involves presentations oftraditional music and dance. For the most part, these performances are sincerely presented by villagers and respectfully attended by visitors. However, in some villages that receive many visitors, dances that usually occur only once a year are now performed as often as three times a day. This obviously diminishes their significance for the community and results in a commercialized tourism product that can quickly lose its authenticity. Communities that have not experienced tourism development may not realize these risks or the need to anticipate tourism’s influences. As a first step, communities need support to understand the important role their heritage plays in their core social values and beliefs that underpin their societies. The CBD approach enables communities to: identify and evaluate all aspects of their cultural heritage; determine what is to be shared with outsiders; and provide authentic presentations for visitors without undermining their meaning (See 21. Enhancing Community Awareness and Decision Making for more detail).

16. Traditional Housing; and Streetscapes. In traditional villages and ancient towns, poverty has resulted in the deterioration ofbasic residential facilities. Improvements such as electricity, sanitation, thermal insulation, wind proofing, and water proofing are warranted in the large majority ofhomes and it is inevitable that as residents can increasingly afford modern conveniences and lifestyles, renovations and improvements will be made to these homes. Experience in China and around the world has shown that this upgrading cannot be severely restricted or residents will move to adjacent areas or new towns to improve their standard of living, leaving villages and ancient town centers uninhabited. In many cases, provincial and national regulations on the conservation oftraditional architecture and streetscapes apply in project villages and towns. It is also extremely important to create a community-level consensus on compliance with these regulations or to develop conservation plans where none exists in order to maintain the value ofthe traditional buildings and streetscapes. Housing renovations should be carried out by master artisans who have traditional skills, and who will pass on these skills to

22 younger generations. Upgrading of exteriors should retain the original building’s architectural style by using traditional materials and construction techniques. The addition of any services, including water and electricity, should use fixtures, ducts, and materials compatible with historic designs and materials. They should also cause minimal harm to the historic structure and restrict any visual impact to a minimum. In addition to community-based conservation and planning regulations, guidelines and examples of local architectural styles, materials, construction techniques and modern adaptations should be available to all those who are renovating traditional buildings.

17. Publicly-owned traditional buildings that are rehabilitated and conserved should be adapted for productive and active new uses such as community centers and cultural centers. Facilities that serve visitors - performance areas, museums, public toilets, administration buildings, information centers, visitor service facilities, and small hotels - should be housed in the rehabilitated traditional buildings, as often as possible. All new structures should be designed to suit local climate and geography and be consistent with the local architectural styles in terms of quality of detail and design, appropriate height and scale, and harmonious materials and color.

18. Cultural and Natural Landscapes. The scale, complexity, and historical character ofthe natural and historic landscape of Guizhou Province represent a remarkable resource of great importance. Reflecting large-scale, dynamic geologic processes, extensive biodiversity, and roughly 5,000 years of continuous human settlement and use, the landscape of Guizhou inherently provides a rare opportunity for the development of landscape-heritage tourism. Generally, the landscape retains its character and integrity, but is also highly susceptible to a wide range of agents of change including some aspects of tourism. Compiling an inventory, documentation, monitoring, and effective management of cultural and natural landscape resources associated with participating project sites should be part of the community-based heritage stocktaking and identification activities. It is of paramount importance that any new structures planned to be built in the natural and cultural landscape must be designed and sited with as little impact as possible on the character of historic villages and towns or on the natural and scenic areas. Installation of infrastructure systems such as electrical light poles and drainage ditches should be carefully considered to minimize their impact on the visual (streetscape) environment. Finally, it is imperative that leisure, recreation and amusement facilities be separated physically and visually from primary cultural and natural assets.

19. National and Scenic Parks. Limited budgets and a lack of conservation expertise and management skills have had an impact on Guizhou’s parks. Some have suffered from the addition of poorly-designed service buildings and low-quality protective rails, lighting, and walkways. Conversely, sites have not benefited from management and protection measures that prevent and mitigate damage from overuse, fire, theft, vandalism, and the elements. To develop a sustainable system which can cope with the expected level of tourist development, parks will require adequate conservation, management systems, and protective measures for their cultural and natural resources. Investments for services, such as toilets and parking lots, should be based on appropriate low-cost technology and materials and should be sufficient to cope with average visitor numbers, rather than the excessive demand during peak periods. Instead alternative existing parking lots that can be accessed and used during high volume periods should be identified.

23 20. Issues that need to be addressed in park planning and development include: (a) zoning and land use, cultural and natural resource protection, infrastructure and facilities development, architectural and landscape design standards, interpretation and information development, commercial services management policies, and marketing and promotion; (b) cultural and natural resource inventory, monitoring and documentation systems that establish base lines and provide ongoing information for strategy development and change management; and (c) provision of infrastructure - including access roads and parking, pathways, power supply, rest rooms (water supply and sanitation), solid waste collection and disposal, administration buildings, tourist service stations, first-aid and safety arrangements.

21. Enhancing Community Awareness and Decision Making. Villagers can clearly see tourists’ interest in their traditional customs and the subsequent potential to increase their income through tourism development. However, it is much more difficult for them to anticipate the changes their communities may experience as a result ofthis increased tourism. Risks include the possibility of: (a) exposure to dissimilar lifestyles and higher incomes that undermine local appreciation oftraditional social values and lifestyles; (b) commercialization oftraditional practices, which are sold and performed as ethnic products, but are specifically designed for the tourist consumers; and (c) unequal distribution ofincome. To address these risks, the project will use a CBD approach that has been applied successfully in many Bank-financed projects in other countries and which has been tested in China with the approval and involvement ofthe central government. Community involvement in the process of decision-making, implementation and monitoring oftourism development, will help ensure that local communities: (a) understand the changes tourism will bring and discuss the resultant advantages and disadvantages; (b) decide the limits ofacceptable change and define strategies for dealing with this change; (c) control the extent and pace oftourism development; and (d) create arrangements for sharing both the benefits and costs oftourism development at the village level.

22. Experience in other countries has shown that the CBD approach can also greatly improve project effectiveness by: (a) generating more in-depth information about local cultural heritage; (b) determining the most relevant investments; (c) improving infrastructure maintenance arrangements; and (d) creating overall community commitment to project activities. The CBD approach will mean not only participation in decision making, but also community responsibilities and, when feasible, the allocation offunds to communities (with necessary financial safeguards) for work to be completed.

23. Generating Income and Alleviating Poverty. The lack ofemployment and business opportunities and the low standard ofliving in traditional villages and ancient towns have resulted in increased migration ofthe younger population to nearby urban areas and to other provinces. This has left behind local populations ofmostly women, children, and the elderly. Clearly, a continuation ofthis trend will eventually create non-viable communities and undermine the preservation ofcultural heritage. While some community members have developed small entrepreneurial activities connected to tourism in the minority villages, ancient towns and parks, many ofthese efforts are of very low quality, provide only small incomes and lead to over supply, excessive competition and repetitious goods for sale. It is critical to provide training and technical assistance in activities that can create sustainable jobs and income. Relevant efforts would include: (a) expansion ofcraft production, including training for younger

24 generations; (b) training in heritage interpretation, exhibition and presentation; (c) tourism promotion and marketing mechanisms; (d) funds channeled to villages to implement project improvements, ensuring that a majority of the village’s labor will be employed; (e) financial assistance for restoring traditional buildings, and for improving private houses; (f) training in vocational trades, and small business development; (g) training and support for the practice of intangible heritage arts; and (h) organization of tourism activities at each site to increase interest, length of stay, and spending by visitors.

25 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Latest Supervision Rating (Bank-financed rojects Only) Sector Issue Project Implementation Development Progress Objective Bank Financed Basic urban services upgrading Zhejiang Multi-cities S S including conservation and repair of Development (C2475; historic buildings and urban fabric 05/18/1993); (ICR #23946; 06/06/2002) Pilot urban services upgrading and Shanghai Urban Environment S S adaptive reuse in a medium density (L4705; 11/10/2003) historic area; preparation of a strategy for the support and management of living culture and the arts Urban heritage conservation strategy, Zhejiang Urban Environment S S tourism planning; upgrading of urban (L4724; 06/02/2004) infkastructure and traditional housing Documentation, conservation, Liaoning Environment (L3781; S S rehabilitation, protection, and 09/16/1994); (ICR #28833; presentation of cultural resources 06/25/2004) Earthquake reconstruction support for Yunnan Earthquake HS HS basic urban services and repair of Reconstruction (C3078; traditional streets, bridges, canals and 06/12/1998); (ICR #22216; historic buildings 06/29/2001) Strategic conservation master plan and Sichuan Urban Environment S S conservation and rehabilitation of key (C325 1L4496; 01/09/2001); heritage sites including World (ICR #377; 01/10/2007) Heritage-listed Leshan Buddha Strategic master plan for heritage Chongqing Urban Environment S S conservation in Chongqing; restoration (L4561; 11/03/2000) of the Huguang Huiguan and to assist the site become self-financing Heritage conservation and Gansu Cultural and Natural S S preservation of key relics; research, Heritage Protection and interpretation and presentation of Development (L7542; cultural and natural heritage assets 3/20/2008) Other Development Agencies Support for World Heritage listing of UNESCO Performance reported satisfactory Chinese cultural relics Technical assistance in cultural UNESCO, UNWTO Performance reported satisfactory heritage management and tourism development

26 Annex 3: Results Framework and Monitoring CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Results Framework

Use of Project Outcome Project Outcome Indicators PDO Information

To assist Guizhou Province in 0 Average per capita income in 0 Measure progress toward the increasing economic benefits to project minority villages PDO of local economic growth local communities (including (RMB/year) 0 Support government decision minority groups) through increased makers in managing tourism tourism and better protected cultural development and the and natural heritages protection and preservation of heritage sites in a sustainable manner

Intermediate Outcome Use of Intermediate Intermediate Outcomes IIndicators Outcome Monitoring 0 Cumulative number ofproject 0 Analyze the preservation of sites with conservation work cultural heritage assets at completed in line with project sites and the approved conservation plans involvement of local communities in the efforts 0 Cumulative number ofyouths toward heritage protection trained for traditional arts and techniques

0 Percentage ofthe selected basic infiastructure in place against the plan

Natural Heritage Protection 0 Analyze the preservation and 0 Number ofthe natural heritage development ofnatural sites with improved access heritage sites as sustainable

0 Number ofthe natural heritage tourist destinations sites with appropriate interpretation and signage in place

Sustainable Tourism Management 0 Analyze the sustainability of 0 Number oftourists at the tourism development in gateway town information Guizhou centers

0 Percentage of minority employment at the gateway town information centers

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0 a c Annex 4: Detailed Project Description CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

1. The project sites are located in the southern part of Guizhou Province, including Qiandongnan and Qianxinan Prefectures, Anshun Municipality and Guiyang, the provincial capital. The project development objective is to assist Guizhou Province in increasing economic benefits to local communities (including minority groups) through increased tourism and better protection of cultural and natural heritages.

Component 1: Ethnic Minority Cultural Heritage Protection (UW44.62 million)

2. This component will be implemented in 17 ethnic minority villages and four ancient towns in Qiandongnan and Qianxinan Prefectures to increase employment and incomes of their residents and improve their basic living conditions, with special attention to the protection of their cultural heritage. Investments will be in:

(a) construction of small scale infrastructure facilities to serve the villages and towns;

(b) rehabilitation and conservation of unique historic buildings and construction or establishment of cultural and visitor centers;

(d) carrying out of income generation activities that preserve and protect intangible cultural heritage through a grant program for provision of technical assistance, training and goods, including: (i)for skills training in arts, crafts, music, stone masonry and carpentry; (ii)for ethnic product promotion, marketing and sales; (iii)for capacity building in community mobilization, formation of community organizations, community-based intangible cultural heritage protection and preservation; and (iv) for rehabilitation and conservation of historic and traditional buildings and construction of buildings and infrastructure under the project.

Subcomponent Project Site Activity

InfrCIstructure: road; drainage; garbage transport station; rubbish bin 1. Tianlong Tunpu Cultural Heritage Tianlong Ancient Town Historic Buildin&Wtural Center: Tunpu culture museum; information center Protection Private House Rehabilitation : traditional residential house; demonshation house

31 Subcomponent I Project Site Activity Infrastructure : parking lot; pedesaian road; fire hydrant; drainage; water supplying facility; garbage transport station; rubbish bin; public toilet; river channel treatment; indication sign; ,J 'ultural Hentage IJiUzh0'

Privute House Rehabilituion : traditional residential house; demonstration house

I ~~ ~ lnfrustructure access, walkmg pass, parking lot, fire fighting pool, fire hydrant, dmnage, sewage treatment, rubbish bin, rubbish pool, public toilet, afforestation, indication sign,

Private House Rehubilitation : traditional residential house; demonstration house

Infrastructure : foot path; village road maintenance; parking lot; water supplying pipe; reservoir; drainage; sewage treatment; fire hydrant pool; fire hydrant; hydrant hose; rubbish bin; garbage transfer station; river clean up; pool environment improvement; af€roestation; indication sign; interpretation sign Xiaohuang Dong village

Historic BuildinglCultural Center: Xiaohuang cultural heritage center

_.Duliu River Dong Private House Rehabilitation traditional residential house Ethnic Cultural Heritage Protection lnfrustructure : foot path; village road maintenance; parking lot; water supplying pipe; reservoir; drainage; sewage treatment; fire hydrant; hydrant hose; rubbish bin; pool environment improvement Zengchong Dong Village Historic BuildinglCulrural Center: Zengchong construction technique heritage center; opening sing hall; traditional wind and rain bridge I I I I I /Private House Rehabilitation: baditional residential house

lnfrastrucfure : walking pass; parking lot; water supplying pipe; drainage; sewage treatment; fire hydrant; rubbish bin; rubbish pool, public toilet, river clean up; village environment

5. Shiqiao Ancient Shiqiao Mia0 Village Papermaking Protection Historic BuildinglCulturul Center : tourist senice and information center; protection of paper making historic site and ancient village door

IPrivute House Rehubilifurion: demonstrationhouse; paper making workshop

~ ~~~ ~~ ~~ lnjiastructure old street renowtion, dronage, fire hydrant, rubbish bin, garbage transfer station, garbage truck, signal system, indication sign, interpretation sign 6 Jiuzhou Ancient Town Jiuzhou Ancient Town Hentage Protection Historic BuildinglCulturul Center monument, catholic church, palace, temple, ancient nver bank, ncient wharf, ancient vlllage gate, ancient residential house

32 _____~ Subcomponent Project Site Activity

Infrastructure : walking pass; trestle; parking lot; wind and rain bridge; wharf; water supplying pipe; water pool; drainage; sewage treatment; fire hydrant; hydrant hose; rubbish bin; rubbish pool; public toilet; afforestation; barn; pool environment improvement; interpretation signs

Wubao Mia0 Village Historic BuildingICultural Center : Wubao red embroidery culture center; souvenir selling house; information center; bull fighting place; shrine; holly tree rest place; well and pavilion

Yang’asha Miao : demonstrationhouse thnic Cultural Heritage IPrivate House Rehabilitation I rotection Infrastructure: walking path; access path; bridle path; trestle; parking lot; water supply pipe; water pool; drainage; sewage treatment; fire hydrant pool; fire hydrant; fire hose; rubbish bin; rubbish pool; public toilet; environmental improwment; afforestation; inidcatiion sign; interpretation sign Zhanliu Miao Village

Hisforic BuildingICultural Center: Caigu place; dating corridor; tin embroidery heritage center

Private House Rehabilitation : traditional residential house; demonstrationhouse

Infrastructure : access; drainage; sewage treatment; fire hydrant pool; fire hydrant; city river reconstruction; river clean up; environment improvement; indication sign; interpretation sign

Longli Ancient Town Longli Ancient Town tourist information center; tourist senice center; Longbiao eritage Protection Historic Buildin~CulturalCenter: Ancient Academy; temple; pavilion; monument; ancient wall; city moat; bridge; ancient wall protection

Private House Rehabilitation : traditional residential house; demonstration house

Infrastructure : walking pass; parking lot; drainage; sewage treatment; rubbish pool; fire hydrant public toilet HualenpuMiao Village Pool;

Private House Rehabilitation : traditional residential house

Infrastructure : walking pass; access to the village; parking lot; wind and rain bridge; water supplying pipe; reservoir; drainage; sewage treatment; rubbish pool; rubbish bin; fire hydrant Bala River Miao pool; public toilet; barn; indication sign; interpretation sign thnic Cultural Heritage lidao Miao Village rotection Hisforic BuildinglCultural Center : cultural and informationcommunication center

~~ Private House Rehabilitation tradihonal residential house, demonstration house

Infrastrucfure access, parhng lot, dranage, sewage treatment, fire hydrant pool, rubbish pool, public toilet Vanhua Miao Village

Historic BuildingICultural Center tourist smce center, Bala nver information center

Infrastructure access, walkmg path, parking lot, fire hydrant pool, water supplpng pipe, reservoir, dranage, sewage treatment stahon, rubbish bins, public toilet 1. Bala River Miao thnic Cultural Heritage Langde Upper Miao Village Historic BuildingICultural Center : Yangdalu former resident house; community cultural center; atection mill workshop; waterwheel; ancient war 6ont; information center IPrivate House Rehabilitation : traditional residential house I Infrastructure : access; walking pass; parking lot; fire hydrant; drainage; sewage treatment; rubbish transfer station; public toilet I. Xijiang Miao Ethnic ultural Heritage Xijiang Miao Village Historic BuildingICultural Cenfer : tourist information center; village entrance door; drum otection place; view sightseeingplatform

Private House Rehabilitation : traditional residential house; demonstration house

33 ~ Subcomponent Project Site Activity

Infrnstrucfure : walking pass; riw bank protection; fire hydrant pool; fire hydrant; fire pump; water supplying station; drainage; sewage treatment; rubbish bin; rubbish pool; medical station angan Dong Village and administrative room

Private House Rehabilifafion: traditional residential house

Infrasfructure : walking pass; access to the village; riwr bank protection; fire hydrant pool; fire hydrant; fire pump; water supplying station; drainage; sewage treatment; rubbish bin; rubbish pool; medical station and administrative room; pwl improvement; indication sign; interpretation sign 2. Zhaoxing Dong lage Dong Village thnic Cultural Heritage village entrance door rotection Historic BuildingICulfural Cenfer:

Private House Rehabilifafion: traditional residential houses

Infrafructure: main streets; walking pass; access to the ~llage;river bank protection; fire hydrant pool; fire hydrant; fire pump; water supplying station; drainage; rubbish bin; rubbish pool; medical station and administrative room ..""..... /Historic BuildingICulfural Cenfer: protection of drum tower and flower bridge

IPrivafe House Rehabilitation : traditional residential house; demonstration house

Infrnsfrucfure : walking path; parking lot; water supplying pipe; drainage; sewage treatment; fire hydrant pool; fire hydrant; rubbish bin; garbage transport station; public toilet; indication sign;

3, Shidong Miao Ethnic ultural Heritage bidong Miao Village protection of ancient architecture, mansion; temple; Shidonl rotection Historic Buildin@dfurol Center: Miao ethnic art display center

~ ~~~ Prfvafe House Rehabilifation : traditional residential house

Infrastructure : walking path; fire hydrant; hydrant hose; fire fighting pump; water supplying pipe; drainage; sewage treatment; rubbish bin; rubbish pool, public toilet; temple; protection of ancient steles and ancient wharf, indication sign; intapretationsign 1. Sanmentang Dong thnic Cultural Heritage anmentang Dong Village rotection Hisforic BuildingICultural Cenfer : administrative house; tourist information center; ethnic culture and performance place

IPrivafe House Rehabilifofion : traditional residential house

Infrastrucfure : walking path; sewage system; public toilet; water supply system; afforestation 5. Nachan Buyi Ethnic I ~~~ ultural and Natural achan Buy Village Buyi cultural center eritage Protection Historic Buildin/Cultural Center

IPrrvafe House Rehabilifofion : traditional residentianl house; demonstration house

Component 2: Natural Heritage and Scenic Site Protection and Development (US$21.35 million)

3. This component consists of the carrying out of physical investments to improve infrastructure and tourism facilities in: (a) Guanling National Geo-Park in Anshun Municipality; (b) Dingxiao National Geo-Park in Qianxinan Prefecture; (c) Wanfenglin National Scenic Park in Qianxinan Prefecture; and (d) Shanmu River Scenic Park in Qiandongnan Prefecture, including construction and/or rehabilitation of pedestrian roads, public toilets, water supply and sanitation facilities, signage, and tourist service centers, and the implementation of measures for environmental and ecological protection of such parks.

34 Project Site Activity Parking lot; public toilets; demonstrative excavated area; tourist service centers; construction of a park and supporting facilities; rubbish bins; garbage transfer station; Guanling National Geo-Park demonstration facility; theme hall; park afforestation; research center; indication signs; interpretation signs Administrative rooms; tea house; walking pass; wharf; parking lots; wind and rain bridge; walking bridge; entrance road; scenery bridge, water supplying stations; 2. Shanmu River Scenic Park drainage; sewage treatment; rubbish bins; garbage transport stations; public toilets; monitoring system; security system; indication signs; rehabilitation oftraditional I residential houses I FaoNational Geo-Park I Dragon fossil museum and square

Walking path; bridge; entrance door; view point station; water supply; drainage; public toilets; garbage station; cultural center; holly tree place; tourist information cente; village environment protection; ancient tree protection; rubbish bins; sewage pipes; Wanfenglin National Scenic Park 4. hiking and mountain bicycling experience system (rest station, camping facilities, hikin path, bicycle road, sight seeing platform, environmental protection); rehabilitation of traditional residential houses and demonstration houses in the village

Component 3: Tourism Gateway Town Facilities Development (US$16.34 million)

4. This component consists of the following:

(a) construction of three tourist information centers in Jianhe, Leishan, and Liping Counties in Qiandongnan Prefecture, and provision of goods, technical assistance and training to strengthen institutional capacity, at the county level, for the promotion of tourism; and

(b) construction of the Guizhou Cultural and Natural Heritage Protection and Development Center in Guiyang to house:

(i)a Cultural and Natural Heritage Protection and Tourism Development Research Center with research sections on natural heritage, tangible cultural heritage, and intangible cultural heritage - as well as an international academic research and exchange facility, a performance hall and a lecture hall;

(ii)a Tourist Information and Service Center, including areas for information, services, and minority culture displays and product sales;

(iii)a Tourism Training Center for developing and providing training to tourism bureau staff, site managers, and villagers in the following fields: rural tourism development and management (which will cover issues such as visitor expectations, community rights and etiquette, home-stays and restaurant business planning, management and standards, and event and festival planning); and cultural awareness and conservation (which involves participatory identification and awareness raising of community cultural heritage, development of authentic information on ethnic minority customs, crafts, costumes, performance, sports, cuisine and history, best practice for avoiding commercialization of local heritage, and planning of cultural heritage interpretation and exhibits); and

35 (iv) a Tourist Destination Management Website for site information and marketing.

Component 4: Capacity Building and Project Implementation Support (US$1.81 million)

5. This component consists ofthe following:

(a) strengthening of institutional capacity and capability: (i)at the provincial level to manage, implement and monitor project activities; and (ii)at the village level, for conservation of traditional buildings and for facilitating community organization and village-level activities especially in the grant programs for traditional private house rehabilitation and conservation and intangible heritage preservation;

(b) strengthening of capacity and capability in the tourism sector: (i)at the county level through the provision of goods and technical assistance to Project Management Offices (PMOs); and (ii)at the provincial and local levels through provision of training for staff of PMOs, Project Implementation Units, and provincial and local government tourism administrative units; and

(c) reviewing and updating of the Guizhou Tourism Development Master Plan to align its strategies to current circumstances, including improved access oftourism sites to highways; and development of design guidelines for the conservation of traditional buildings and traditional environments in minority villages.

36 Annex 5: Project Costs CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Local Foreign Total Project Cost By Component US$ million US$ million US$ million 1. Ethnic Minority Cultural Heritage Protection 30.26 5.06 35.32 (1) Tianlong Tunpu Cultural Heritage Protection 0.86 0.14 1.00 (2) Jiuzhou Tunpu Cultural Heritage Protection 2.76 0.46 3.22 (3) Basha Mia0 Ethnic Cultural Heritage Protection 0.94 0.16 1.10 (4) Duliu River Dong Ethnic Cultural Heritage Protection 2.38 0.40 2.78 (5) Shiqiao Ancient Papermaking Protection 0.87 0.15 1.02 (6) Jiuzhou Ancient Town Heritage Protection 3.01 0.51 3.52 (7) Yang’asha Miao Ethnic Cultural Heritage Protection 1.99 0.33 2.32 (8) Longli Ancient Town Heritage Protection 4.4 1 0.74 5.15 (9) Kaili Bala River Miao Ethnic Cultural Heritage Protection 2.00 0.33 2.33 (IO) Leishan Bala River Miao Ethnic Cultural Heritage 0.71 0.12 0.83 Protection (1 1) Xijiang Miao Ethnic Cultural Heritage Protection 2.01 0.34 2.35 (12) Zhaoxing Dong Ethnic Cultural Heritage Protection 3.00 0.49 3.49 (13) Shidong Mia0 Ethnic Cultural Heritage Protection 2.19 0.37 2.56 (14) Sanmentang Dong Ethnic Cultural Heritage Protection 1.29 0.22 1.51 (15) Nachan Buyi Ethnic Cultural and Natural Heritage 1.84 0.30 2.14 Protection 2. Natural Heritage and Scenic Site Protection and 14.27 2.40 16.67 Development (1) Guanling National Geo-Park Heritage Protection 3.90 0.65 4.55 (2) Shanmu River Cultural and Natural Heritage Protection 2.20 0.37 2.57 (3) Xingyi National Geo-Park Dingxiao Guizhou Dragon 2.02 0.34 2.36 Heritage Protection (4) Wanfenglin National Scenic Park Cultural and Natural 6.15 1.04 7.19 Heritage Protection 3. Tourism Gateway Town Facilities Development 10.02 3.13 13.15 (1) Jianhe Tourist Information and Training Center 2.28 0.39 2.67 (2) Leishan Tourist Information Center 0.27 0.05 0.32 (3) Liping Tourist Information Center 0.99 0.17 1.16 (4) Guizhou Cultural and Natural Heritage Protection and 6.01 2.45 8.46 Development Center (5) Minority Ethnic Culture Tourism Promotion and Training 0.47 0.07 0.54 4. Capacity Building and Implementation Support 1.62 1.62 (1) Technical Assistance for Project Implementation and 0.63 0.63 Capacity Building (2) PMO Strengthening and Training for Tourism Sector 0.63 0.63 (3) Revision of Tourism Master Plan and Preparation of 0.36 0.36 Design Guidelines for Construction and Conservation

Total Baseline Cost 56.17 10.59 66.76 Physical Contingencies 2.43 0.49 2.92 Price Contingencies- 13.76 0.68 14.44 Total Project Costs 72.36 11.76 84.12 Interest During Construction 5.57 5.57 Front-end Fee 0.15 0.15 Total Financing Required 72.36 17.48 89.84

37 Counterpart IBRD Total Project Cost By Component US$ million US$ million US$ million 1. Ethnic Minority Cultural Heritage Protection 13.22 31.40 44.62 (1) Tianlong Tunpu Cultural Heritage Protection 0.37 0.89 1.26 (2) Jiuzhou Tunpu Cultural Heritage Protection 1.23 2.92 4.15 (3) Basha Miao Ethnic Cultural Heritage Protection 0.40 0.97 1.37 (4) Duliu River Dong Ethnic Cultural Heritage Protection 1.03 2.47 3.50 (5) Shiqiao Ancient Papermaking Protection 0.38 0.90 1.28 (6) Jiuzhou Ancient Town Heritage Protection 1.32 3.12 4.44 (7) Yang’asha Mia0 Ethnic Cultural Heritage Protection 0.86 2.05 2.91 (8) Longli Ancient Town Heritage Protection 1.94 4.57 6.5 1 (9) Kaili Bala River Miao Ethnic Cultural Heritage Protection 0.86 2.06 2.92 (10) Leishan Bala River Miao Ethnic Cultural Heritage 0.3 1 0.73 1.04 Protection (1 1) Xijiang Mia0 Ethnic Cultural Heritage Protection 0.88 2.09 2.97 (12) Zhaoxing Dong Ethnic Cultural Heritage Protection 1.30 3.07 4.37 (13) Shidong Mia0 Ethnic Cultural Heritage Protection 0.97 2.30 3.27 (14) Sanmentang Dong Ethnic Cultural Heritage Protection 0.57 1.36 1.93 (15) Nachan Buyi Ethnic Cultural and Natural Heritage 0.80 1.90 2.70 Protection 2. Natural Heritage and Scenic Site Protection and 6.36 14.99 21.35 Development (1) Guanling National Geo-Park Heritage Protection 1.77 4.17 5.94 (2) Shanmu River Cultural and Natural Heritage Protection 0.96 2.26 3.22 (3) Xingyi National Geo-Park Dingxiao Guizhou Dragon 0.93 2.17 3.10 Heritage Protection (4) Wanfenglin National Scenic Park Cultural and Natural 2.70 6.39 9.09 Heritage Protection 3. Tourism Gateway Town Facilities Development 4.69 11.65 16.34 (1) Jianhe Tourist Information and Training Center 1.04 2.43 3.47 (2) Leishan Tourist Information Center 0.12 0.29 0.41 (3) Liping Tourist Information Center 0.45 1.06 1.51 (4) Guizhou Cultural and Natural Heritage Protection and 3.06 7.19 10.25 Development Center (5) Minority Ethnic Culture Tourism Promotion and Training 0.02 0.68 0.70 4. Capacity Building and Implementation Support 1.81 1.81 (1) Technical Assistance for Project Implementation and 0.70 0.70 Capacity Building (2) PMO Strengthening and Training for Tourism Sector 0.70 0.70 (3) Revision of Tourism Master Plan and Preparation of 0.4 1 0.4 1 Design Guidelines for Conservationof Traditional Buildings

Total Project Costs 24.27 59.85 84.12 Financial Charges During Implementation 5.57 0.15 5.72 Total Financing Required 29.84 60.00 89.84

38 Annex 6: ImplementationArrangements CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

1. The Guizhou Provincial Tourism Bureau (GTB) has been designated as the project execution agency. The diagram below indicates key institutional and implementation arrangements for the project, which are summarized in detail in the following paragraphs.

Guizhou Project Leading Group Tourism Development I I Expert Committee 4 Guidance I I .1 I MunicipaLPrefectural Guizhou Project +----- I Management Group I Technical Guidance Project Leading Group I 1 I I I I I I County-level Project MunicipalPrefectural +------j I Management I I

...... Consultation and Management > II

Community Project ImplementationUnit I I Village Supervision Village Committee Group Management Group I II I

I Village Implementation Groups Community I ...... CoordinatorFacilitator Village Tourism Association Guidance Construction Team and Assistance Arts and Crafts Association Senior Citizens Association Other

Village Organization Svstem

2. Project Leading Groups. Project Leading Groups (PLGs) have been established at the provincial, municipal/prefectural and county levels.

3. The Provincial Project Leading Group (PPLG) is headed by the Vice Governor of Guizhou Province, with the Deputy Secretary ofthe Guizhou Provincial Government, the Director ofthe GTB, the Vice Director ofthe Guizhou Provincial Development and Reform Committee, and the Accountant-General of the Guizhou Provincial Finance

39 Bureau as deputy leaders. Other members of the PPLG include representatives from the Guizhou Provincial Economy and Trade Commission, the Guizhou Provincial Ethnic Affairs Commission, the Guizhou Provincial Land and Resources Bureau, the Guizhou Provincial Construction Bureau, the Guizhou Provincial Transportation Bureau, the Guizhou Provincial Water Resources Bureau, the Guizhou Provincial Forestry Bureau, the Guizhou Provincial Culture Bureau, the Guizhou Provincial Environmental Protection Bureau, and the Guizhou Provincial Office of Poverty Alleviation. The PPLG is responsible for providing overall guidance on the project. Specifically, its main responsibilities include: (a) mobilization of financial, technical and institutional resources; (b) coordination and resolution of key project issues across government agencies; and (c) review and approval of project planning, implementation, and management schemes.

4. Municipal/prefectural and county-level PLGs have similar structural arrangements as the PPLG, with leaders from corresponding government agencies at the local level. They have similar responsibilities for preparation and implementation of project components under their jurisdiction to those of the PPLG.

5. Project Management Offices. Project Management Offices (PMOs) have been established at the provincial, municipal/prefectural, and county levels to manage and coordinate the implementation oftheir respective project subcomponents.

6. The Guizhou Provincial Project Management Office (PPMO) is located under the GTB and led by the Deputy Director of the GTB. Besides an executive deputy director and an assistant director, the PPMO has a total of six full-time staff for: (a) project administration and management; (b) quality control and monitoring; (c) procurement; and (d) financial management. Staff with appropriate backgrounds from such government agencies as the Guizhou Provincial Environmental Protection Bureau and the Guizhou Provincial Culture Bureau will be appointed to provide the PPMO with technical guidance and direction, as needed. The PPMO will be responsible for developing annual work plans, preparing consolidated project progress and financial reports for Bank review, and monitoring overall implementation progress and project impacts.

7. Municipal/prefectural and county-level PMOs are located under their respective tourism bureaus and are led by the directors or deputy directors of the tourism bureaus. The PMOs will have an adequate number of staff for project administration and management, procurement, financial management, and other technical aspects, supported by consultants for project management (including monitoring of the private house and intangible heritage grant programs in the case of the county-level PMOs). The PMOs will be in charge of guiding and managing the preparation and implementation ofproject subcomponents under their jurisdiction and coordinating day-to-day activities with the PPMO.

8. Project Implementation Units. Project Implementation Units (PIUs) have been established at the component or subcomponent level. While the PIUs for the project are mainly prefectural and county-level tourism bureaus, the PPMO is the PIU for the

40 Capacity Building and Implementation Support component, and the Guizhou Normal University for the Guizhou Cultural and Natural Heritage Protection and Development Center subcomponent. The list of the PIUs is found at the end of this Annex.

9. Tourism Development Expert Committee. The Tourism Development Expert Committee has supported project preparation (especially for social aspects) through technical guidance and consultation. It will continue this function during project implementation. The committee is composed of scholars and government officials in Guizhou in the areas of: (a) agriculture; (b) cultural heritage protection; (c) environmentalism; (d) planning; (e) engineering; (f) poverty alleviation; and (g) construction.

10. Village-level Implementation. Eleven subcomponents in 17 minority villages under the Ethnic Minority Cultural Heritage Protection component will be implemented through the community-based development approach in a fully participatory manner. The county-level PMOSin Qiandongnan and Qianxinan Prefectures will be in charge of fund management and procurement, and administer the grant programs for private house rehabilitation and conservation and intangible cultural heritage protection (items (c) and (d) of the Ethnic Minority Cultural Heritage Protection component) and oversee the implementation ofvillage-level activities. However, the minority villages, through the representative organizations that will be formed, will be involved in the design, selection of sites and beneficiaries for grant programs, implementation of small works, and management of the village-level activities to ensure that their needs and priorities are met and that long-term sustainability is achieved. The Community Project Management Group (CPMG), which is composed of a range of village representatives, will play a lead role in reaching consensus on decisions on each ofthe various activities through consultations with the village, with the guidance and support of a community coordinator/facilitator and other technical specialists. The role and organization of each organization in the minority villages are summarized below, and also described in detail in the Operation Manual for Community Participation.

(a) Village Committee. The Village Committee is established according to the Organic Law of the Villagers Committees of the People’s Republic of China and other relevant laws. Its major responsibilities under the project include: (i)organizing a village assembly, informing villagers of project implementation, and publicizing the details of the project; (ii)guiding and supervising the implementation of the village- level activities; and (iii)resolving conflicts among villagers.

(b) Community Project Management Group. The CPMG consists of three members from the Village Committee - a secretary or head of the village, a director of women’s issues, and an accountant - as well as elected village representatives for accounting, engineering, material management, and other technical aspects. The number of village representatives will vary depending on the structure of the village and its responsibilities for project activities. The major responsibilities of the CPMG under the project are to: (i)establish working rules and administrative regulations; (ii)be the signatory for the implementation agreement with the county-level PMO for

41 coordinating the private house rehabilitation and conservation, and intangible heritage protection grant programs; (iii)supervise the use of allocated funds; (iv) plan and guide the selection of project sites and grant beneficiaries; (v) coordinate implementation of project activities, including providing guidance to Village Implementation Groups (VIGs); and (vi) keep records of meetings, project implementation progress, fund allocations; and (vii) maintain transparency through regular disclosures to villagers.

(c) Village Supervision Group. The Village Supervision Group (VSG) consists of three to five elected village representatives. The number of group members will be determined by the village population and project size. However, at least one third of the members will be female. Its major responsibilities under the project are to: (i) ensure that the CPMG adheres to the established rules and regulations and remains open and fair in the selection, implementation, and management of project activities; (ii)supervise villagers to ensure the established procedures are followed and respected; (iii)reflect opinions and suggestions from villagers in meetings with the county-level PMO and the CPMG; and (iv) prepare supervision reports for submission to the county-level PMO as well as the CPMG.

(d) Village Implementation Groups. Prior to project implementation, villagers will be organized into different VIGs, such as Village Tourism Association, Construction Team, Arts and Crafts Association and Senior Citizens Association based on the needs of each village. These groups will have a key role in providing expertise and skills to conduct project activities, and will actively participate in architectural rehabilitation and conservation and intangible cultural heritage protection.

11. A community coordinator/facilitator under the project will assist the minority villages in establishing the CPMG, the VSG, and various VIGs. The coordinator/facilitator will also provide support and guidance to these village organizations during the project implementation phase to ensure that their responsibilities are fulfilled for successful execution of project activities. The PPMO will also provide technical specialists to work in the villages to assist in the conservation of traditional buildings and improving environments.

12. Implementation Support and Training. Project implementation support will be provided to the PPMO through the Capacity Building and Project Implementation Support component which will ensure smooth project management and coordination during the implementation phase. Similar support will be provided to the minority villages through the same component which will also allow effective and sustainable community organization and development, again during the implementation phase. In addition, training will be conducted for PPMO, PMO, and PIU staff, and provincial and local officials in the tourism sector. The PPMO will be responsible for managing all training activities, including planning, development, and budgeting, which will be described in detail in annual work programs.

42 ,

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C 3 t-" Annex 7: Financial Management and Disbursement Arrangements CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Introduction

1. The Financial Management Specialist (FMS) conducted an assessment of the adequacy of the project financial management system of the project. The assessment, based on guidelines issued by the Financial Management Sector Board on November 3, 2005, has concluded that the project meets the minimum Bank financial management requirements, as stipulated in BP/OP 10.02. In the FMS’ opinion, the project will maintain adequate financial management arrangements acceptable to the Bank and, as part of the overall arrangements that the borrower has in place for implementing the project, provide reasonable assurance that the proceeds of the loan will be used for the purposes for which the loan is granted. Financial management risk is the risk that World Bank loan proceeds will not be used for the purposes intended and is a combination of country, sector and project specific risk factors. Taking into account the proposed risk mitigation measures, the financial management risk rating proposed for the project is substantial.

2. Funding sources for the project include the Bank loan and counterpart funds. The loan proceeds will flow from the Bank into a project designated account (DA) to be set up at and managed by the Guizhou Provincial Finance Bureau (GFB), to various municipal/prefectural and county finance bureaus, to Project Implementation Units (PIUs), and finally to contractors or suppliers. The Loan Agreement will be signed between the Bank and the People’s Republic of China through its Ministry of Finance (MOF), and on-lending agreements for the Bank loan will be signed between the MOF and the GFB, in turn between the GFB and related municipal/prefectural finance bureaus, and finally between municipal/prefectural finance bureaus and county finance bureaus.

Country Issues

3. To date, no China Financial Accounting Assessment (CFAA) has been performed for China, though dialogue with the Government of China in respect of the CFAA exercise has been initiated. However, based on observations of developments in the areas of public expenditures, accounting and auditing, and Bank experience with China projects in the past few years, it has been noted that substantial achievement in the aforementioned areas has been made and further improvement is expected in the next few years. This is work in progress, and as the economic reform program unfolds further, the Government of China has come to realize the importance of establishing and maintaining an efficient and effective market mechanism to ensure transparency and accountability, and minimize potential fraud or corruption.

4. Due to a unique arrangement by the Government of China, funding (particularly the Bank loan) of Bank projects is controlled and monitored by the MOF and its extension (i.e. finance bureaus at the provincial, municipal/prefecture and county level).

44 However, project activities are usually carried out by implementing entities of a specific industry or sector due to the level and complexity of expertise involved. This arrangement then usually requires more coordination for the project, as the multi-level management of the funding and implementation mechanism sometimes works to the detriment of smooth project implementation.

Summary of Project Description

5. The development of the proposed project is to assist Guizhou Province in increasing economic benefits to local communities (including minority groups) through increased tourism and better protection of cultural and natural heritages. The project is designed to: enhance opportunities to protect and preserve cultural and natural heritage assets; improve basic living conditions through upgrading infrastructure facilities; increase employment and incomes for residents of minority villages; improve facilities for tourists; and support project management and capacity building for sustainable tourism management. For the detailed project description, please refer to Annex 4.

Audit Arrangements

6. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank-financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People’s Republic of China. The Guizhou Provincial Audit Office has been identified as auditor for the project. Annual audit reports will be issued by the Guizhou Provincial Audit Office and subject to reviews by the China National Audit Office (CNAO). The Bank currently accepts audit reports issued by the CNAO or provincial/regional audit bureaus/offices for which the CNAO is ultimately responsible.

7. The annual audit report ofproject financial statements will be due to the Bank within six months after the end of each calendar year. This requirement is stipulated in the Loan Agreement. The responsible agency and timing are summarized as follows:

Audit Report Submitted By Due Date Consolidated project financial PPMO June 30 of each calendar year statements

Risk Assessment and Mitigation

8. The following risks with corresponding mitigating measures have been identified during the assessment:

45 Risk Risk Conditions Rating Incorporated Risk Rating After of, Board or Risk Before Mitigating Measures Mitigating Effectivenes Mitigating Measures S Measures Inherent Risk Country Modest Continuous dialogue with related Modest Level government entities, and technical assistance fkom the Bank will help the government improve its public sector financial management. In the short-term, annual audit requirements will reduce the risk that project fhds are not used for intended purposes. For those areas where the government system can not be used, the Bank’s specific requirements will be embedded into the project financial management system. Entity High Although the Guizhou Provincial Project Substantial Level Management Office (PPMO) has no prior experience with Bank-financed projects, GFB’s involvement will mitigate some of these risks.

Furthermore, the Bank will work with the PPMO to strengthen their financial management knowledge and capacity to supervise the project’s financial management.

The PPMO has recruited experienced financial staff to manage and oversee the overall financial management ofthe project.

All Project Implementation Units (PIUs) have recruited experienced and competent finance staff either with proper finance/accounting education or with two to three year working experience in finance/accounting areas.

Project High To furnish the PPMO and PIUs with Substantial Level enough knowledge and information in managing the project, a training schedule for financial management/disbursement will be established. A training session should be provided to the project financial staff during a project launch workshop by the Bank and another training session for the project staff by the PPMO and the GFB within one year after the project starts implementation.

46 A Financial Management Manual (FMM) including detailed financial management and disbursement procedures has been drafted to standardize all PIUs’ financial work and to detail roles and responsibilities of PIUs, the PPMO and finance bureaus. Control Risk Budgeting Modest There are some existing budgeting controls Modest at PIUs, although they do not specifically focus on the project activities. Accounting Substantial Accounting policies and procedures for the Modest Bank loan are already in place. Checking by the Bank at the initial implementation stage to ensure the accounting system has been correctly set up. This should be -7- followed up by regular supervision missions. Internal High There are some existing internal controls at Substantial Control PIUs although they do not specifically focus on the project activities. The FMM has been prepared and issued to all PIUs to uniformly align their financial management arrangements, disbursement requirements and internal control procedures. Also, the r disbursement documents will be reviewed by the GFB to ensure compliance. Funds Flow High The flow of withdrawal applications (Was) Substantial and loan proceeds will go through several finance bureau levels, which will affect project implementation efficiency. The Bank will ensure that mechanisms will be in place to ascertain that the Bank loan and I counterpart fhds will be released to the ultimate beneficiaries on a timely basis and avoid bottleneck in disbursements. Procedures on WASand funds flow are clearly documented in the FMM. Financial High The format and contents of financial Substantial Reporting statements have been stipulated by the MOF and all PIUs will use them for project financial reporting. The FMM also establishes such financial reporting requirements consistent with MOF’s regulations and guidance. The PPMO will be responsible for the consolidated project financial statements. Auditing Modest The external auditor, Guizhou Provincial Modest Audit Office, has experience with previous Bank projects. t Overall High Substantial I

9. Based on the above assessment, the overall financial management risk rating of the project, after consideration ofthe mitigating measures, at the appraisal stage is

47 substantial. The FMS will monitor the project financial management risk during project implementation.

Disbursement Arrangements

10. Four disbursement methods: advance, reimbursement, direct payment and special commitment are available for the project. Supporting documents required for Bank disbursement under different disbursement methods will be documented in the Disbursement Letter issued by the Bank. Applications will be supported by:

(a) The list ofpayments against the contracts, and records evidencing eligible expenditures, e.g. copies ofreceipts, supplier invoices, for the contracts subject to the Bank’s prior review indicated in the table below:

Equivalent Works 1,000,000 Goods 300.000

I Individual Consultant 50,000

(b) Statement ofexpenditures for any other expenditure.

11. One segregated DA denominated in US Dollars will be established at a commercial bank acceptable to the Bank, and managed by the GFB. The ceiling ofDA for the Bank loan will be specified in the Disbursement Letter issued by the Bank.

12. The GFB will be directly responsible for the management, maintenance and reconciliation ofDA activities ofthe project. Supporting documents required for Bank disbursement will be prepared and submitted by respective PIUs through the PPMO for final verification and consolidation before sending to the GFB for further disbursement processing. The flow offunds and WASfor the loan proceeds is illustrated in the following chart:

48 ------b FlowofWAs Flow of Funds

49 13. The Bank loan would be disbursed against eligible expenditures as indicated in the table below:

Amount of the Loan Percentage of Expenditures Category Allocated to be financed (expressed in Dollars) (inclusive of taxes) (a) Civil works 5 1,068,000 90% (b) Goods 759,000 100% (c) Consultants’ services, training and study tours 3,500,000 100% (d) Block grants 4,373,000 100% (e) Incremental operating costs 150,000 100% I I Amount payable pursuant to Section 2.03 of the Loan Front-end fee (f) 50,000 1 Agreement in accordance with Section 2.07 (b) of the General Conditions Amount payable pursuant to (g) Premium for interest Section 2.07 (c) of the Loan rate cap or interest rate Agreement and Section 4.05 collar (c)._ of the General Conditions Total amount 60,000,000

14. Limited incremental operating costs will be financed by the Bank loan, and would cover the reasonable expenditures incurred by the PPMO for local business travel for consumables, and salaries of additional staff hired on individual contracts. The definition of incremental operating costs and its coverage will be in accordance with the Bank’s policy, and as specified in the Loan Agreement. In order to better manage the incremental costs, the PPMO will submit the annual budget for incremental operating costs, including a detailed description, for approval by the Bank. The incremental operating costs will be disbursed on an actual basis but the actual costs incurred shall not exceed the annual budget approved by the Bank. All relevant supporting documents including receipts and bills shall be retained by the PPMO for Bank review.

15. Retroactive financing amounting to US$2 million might be provided for eligible expenditures under categories (a), (b) and (c) in the above table, incurred after December 1, 2008, provided procurement is carried out in conformity with Bank procurement procedures.

50 16. The project includes two subcomponents which will be implemented solely on the community-based development (CBD) approach. These are grant programs defined under items (c) and (d) ofthe Ethnic Minority Cultural Heritage Protection component (rehabilitation and conservation oftraditional private houses in villages and intangible cultural heritage protection and preservation). Disbursement arrangements and procedures for these subcomponents are described below.

17. DeJinition. The Block Grant mechanism will be used to disburse the expenditures associated with the implementation of the two subcomponents. This is a means of financing grants to be made out ofthe proceeds of the loan to: (a) a beneficiary household who conducts rehabilitation or conservation of selected traditional houses; and (b) a village that conducts intangible cultural heritage protection and preservation activities. The respective county government is responsible for repaying the loan proceeds to the GFB .

18. The eligibility criteria and procedures to disburse the expenditures associated with the implementation ofthe grant programs are summarized below, and also described in Annex 15 and the Operation Manual for Community Participation (OMCP).

(a) Private House Conservation and Rehabilitation

(i)Private House Annual Work Plan. The county-level PMO will select traditional private houses and household beneficiaries through a participatory approach in accordance with the procedures and selection criteria set out in the OMCP. The annual work plan will include: the list of selected houses; details ofwork proposed; and estimated cost of the work and the amount of grant proposed to be financed from the loan proceeds. The plan will require the approval ofthe PPMO and the Bank.

(ii)Private House Implementation Agreement. The county-level PMO will sign an implementation agreement with the household beneficiary which will include: the scope ofwork; total cost of the work, the amount ofthe loan proceeds to be used to finance the work, and household contribution; work implementation schedule; agreed technical and construction standards; supervision and final acceptance procedures; and payment schedule and conditions.

(iii)Payment Schedule and Conditions. The county-level PMO will make available the grant to each household under the implementation agreement in two installments: the first installment, which will be between 30% and 50% ofthe grant upon the signing ofthe implementation agreement; and the reminder ofthe grant upon the completion of the work as evidenced by a satisfactory inspection report issued by the county-level PMO.

51 (b) Intangible Cultural Heritage Protection and Preservation

(i)Intangible Cultural Heritage Annual Work Plan. The county-level PMO will select the activities that preserve and protect intangible cultural heritage and village community beneficiaries through a participatory approach and in accordance with the procedures and selection criteria set out in the OMCP. The work plan would include, but not be limited to, the following: the list ofthe selected activities; details ofthe activities, including methods ofimplementation; and estimated cost of each activity and the types and amount of expenditure proposed to be financed from the loan proceeds. The work plan will require the approval ofthe PPMO and the Bank.

(ii)Intangible Cultural Heritage Implementation Agreement. The county-level PMO will sign an implementation agreement with the Community Project Management Group ofthe village concerned for carrying out the selected intangible cultural heritage protection activities. The implementation agreement will include: the list ofthe selected activities; total cost ofthe activities and the type and amount ofexpenditures to be financed from the loan proceeds; activity implementation schedule; agreed outputs and reporting and verification requirements; and payment schedule and conditions.

(iii)Payment Schedule and Conditions. The county-level PMO will make available the grant to each village under the implementation agreement in two installments: the first installment, equal to 50% ofthe grant, upon the signing of the implementation agreement; and the reminder ofthe grant when the agreed outputs stated in the implementation agreement have been produced and as evidenced by a satisfactory inspection report issued by the county-level PMO.

Financial Management and Reporting Arrangements

19. Strengths. The GFB has experience with World Bank-financed projects. The GFB is thus familiar with the management ofDA and WASprocedures for Bank-financed projects.

20. Weaknesses and Action Plan. The PPMO and all the PIUs do not have experience in Bank-financed projects. To address this, a training session will be provided to the project financial staff during a project launch workshop by the Bank, and another will be provided to the project staff jointly by the PPMO and the GFB within one year after the project begins implementation.

2 1. Implementing Agencies. A Provincial Project Leading Group (PPLG) has been established to provide overall policy guidance and facilitate coordination among different agencies. The PPLG will consist ofrepresentatives from the provincial finance bureau, the provincial development and reform committee, the provincial tourism bureau and other key bureaus.

52 22. The PPMO has been established under the Guizhou Provincial Tourism Bureau. The PPMO is responsible for overall project management and coordination, providing necessary guidance to and coordinating with Project Management Offices (PMOS) at prefectural/municipal and county levels as well as PIUs. The PPMO consists of six full- time staff, including two financial staff and one procurement staff. Generally, in each project city or county, a municipal/prefectural PMO or a county-level PMO has been established.

23. Each PIU will be responsible for day-to-day implementation of its component or subcomponent. In each PIU, a project team has been established which includes one or two financial staff members. The accounting, reporting and preparation of WASfor each component or subcomponent will be handled by each PIU. The list of the PIUs is found below:

Qiandongnan Prefecture

12 Zhaoxing Dong Ethnic Cultural Heritage Protection 13. Shidong Miao Ethnic Cuhural Heritage Protection 114. Sanmentang Dong Ethnic Cuhural Heritage Protection I

15. Nachan Buyi Ethnic Cultural and Natural Heritage Protection Qianxinan Prefecture Zhenfeng County Tourism Bureau 16. Guanling National Geo-Park Heritage Protection Anshun Municipality Guanling County Tourism Bureau

17. Shanmu River Cuhural and Natural Heritage Protection Qiandongnan Prefecture Shibing County Tourism Bureau

Xingyi National Geo-Park Dinpiao Guizhou Dragon 18. Dinpiao Development Zone Government Heritage Protection Qianxinan Prefecture Hiking trails: Qianxinan Prefecture Tourism 19. Wanfenglin National Scenic Park Cultural and Natural Bureau Heritage Protection Scenic area: Xingyi City Tourism Bureau 20. Tourist Information and Training Center Jianhe County Tourism Bureau 21. Tourist Information Center Leishan County Tourism Bureau 22. Tourist Information Center Liping County Tourism Bureau 23. Guizhou Cultural and Natural Heritage Protection and Qiandongnan Prefecture Guizhou Normal University Development Center

24. Minority Ethnic Culture Tourism Promotion and Training Qiandongnan Prefecture Tourism Bureau

25. Technical Assistance Guizhou Province Guizhou PMO

24. Budgeting. Although the cost table has been prepared for the project and the project will prepare its annual implementing plan, the budgeting system within the project is usually not well maintained or monitored. The FMS will work with the related entities to improve their budgeting systems during project implemenation.

53 25. Accounting. The administration, accounting and reporting of the project will be set up in accordance with Circular # 13 : “Accounting Regulations for World Bank Financed Projects” issued in January 2000 by the MOF. The circular provides in-depth instructions of accounting treatment of project activities and covers the following:

0 Chart of account 0 Detailed accounting instructions for each project account 0 Standard set of project financial statements 0 Instructions on the preparation of project financial statements

26. The standard set of project financial statements mentioned above has been agreed between the Bank and the MOF and applies to all Bank projects appraised after July 1, 1998 and includes the following:

0 Balance sheet of the project

0 Statement of sources and uses of fund by project components

0 Statement of implementation of loan agreement

0 Statement of DA Notes to the financial statements

27. Each PIU will manage, monitor and maintain its respective project accounting records for its components. Original supporting documents for project activities will be retained by each PIU. In addition, each PIU will prepare its own financial statements, which will then be reviewed, approved and consolidated by the PPMO before sending to the Bank for review and comment, on a regular basis.

28. To strengthen financial management capacity and achieve consistent quality of accounting work, a project FMM has been prepared. The FMM provides detailed guidelines on financial management including internal controls, accounting procedures, fund and asset management, WA procedures, financial reporting and auditing arrangement.

29. Some PIUs will use computerized financial management information software, while others will manually record and maintain their project accounting books. The Bank will monitor the accounting process, especially during the initial stage to ensure that complete and accurate financial information will be provided in a timely manner.

30. Internal Control and Internal Auditing. The related project accounting policy, procedures and regulations were issued by the MOF and the FMM has been prepared and issued by the PPMO to uniformly align the financial management and disbursement requirements among the different PIUs. The project will follow these documents.

3 1. There is no formal independent Internal Audit Department for the project. However, this will not have an impact on the project’s financial management as the PPMO, relevant finance bureau monitoring, and annual external audits will serve as the mechanism to ensure that financial management controls are functioning appropriately.

54 32. Financial Reporting. The format and content ofthe project financial statements represent the standard project financial reporting package agreed to between the Bank and the MOF, and have been discussed and agreed to with all parties concerned.

3 3. Each PIUwill prepare financial statements on its implemented components, which will then be used by the PPMO for preparing consolidated project financial statements to be submitted to the Bank for review and comment on a regular basis. In line with the updated World Bank Operation Manual, the interim un-audited project financial statements should be submitted as part ofa progress report to the Bank on a semi-annual basis.

34. Financial Covenants. No specific financial management covenants are applicable to the project except for those standard financial covenants such as project audit and interim financial reports as described in paragraphs 6 and 7.

35. Supervision Plan. The supervision strategy for the project is based on its financial management risk rating, which will be evaluated on a regular basis by the FMS and in consultation with the Task Team Leader.

55 Annex 8: Procurement Arrangements CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

A. General

1. Procurement for the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004, revised October 2006 and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan was prepared by the Guizhou Provincial Project Management Office (PPMO) and will be updated at least annually or as required, to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works. A total of about US$51.07 million worth of works will be procured. Works procured under this project will include:

Construction of roads, squares, footpaths and parking lots including auxiliary facilities such as road signs; Construction ofbuildings such as visitor service centers, tourist information centers, museum halls, administrative staff offices, training centers for cultural heritage, and toilets; Construction, installation and commissioning of water supply systems including pipelines, water tanks, etc.; Construction, installation and commissioning of waste water treatment systems including pipelines and small treatment plants; Construction of garbage collection facilities and small landfills; Improvement of river banks and construction of bridges; Rehabilitation and conservation of ancient buildings including auxiliary protection works and facilities such as signs and guardrails; Rehabilitation and conservation of traditional private houses; and Protection and preservation of intangible heritage including lectures and training hosted by local masters for intangible heritage, rehabilitation of workshops, business development of products made by traditional processes, etc.

Procurement will be undertaken using the Bank’s Standard Bidding Documents (SBDs) for all International Competitive Bidding (ICB) and the Chinese Model Bidding Documents (MBDs) for goods and works agreed with or satisfactory to the Bank for all National Competitive Bidding (NCB) procurement. Where procurement of small works through shopping is applied, the PPMO will prepare a model quotation document which

56 will be agreed with the Bank before implementing the related procurement. Any contract for works estimated to cost US$lOO,OOO equivalent or more will be procured under NCB procedures. Any contract for works estimated to cost less than US$lOO,OOO will be procured under shopping procedures. According to the current Procurement Plan, no ICB procurement is expected due to the nature and value ofthe contracts.

4. Civil works associated with the rehabilitation or conservation ofprivate houses in villages, will be carried out by the household beneficiary through community participation in accordance with the following procedures:

(a) Selection of Households. Traditional private houses and household beneficiaries will be selected through a participatory approach in accordance with the selection criteria set out in the Operation Manual for Community Participation (OMCP). A list ofthe selected private houses shall be included in the annual work plan which will be prepared by the county-level Project Management Office (PMO) and approved by the PPMO and the Bank.

(b) Signing of Implementation Agreement with Households. The county-level PMO will sign an implementation agreement with individual household beneficiaries. The implementation agreement will include: (i)the scope ofwork; (ii)total cost of the work, the amount ofthe loan proceeds to be used to finance the work, and household contribution; (iii)work implementation schedule; (iv) agreed technical and construction standards; (v) supervision and final acceptance procedures; and (vi) payment schedule and conditions.

(c) Implementation. Household beneficiaries will purchase required materials such as sand and cement, from the local market. Wherever possible the individual household beneficiary will obtain three quotations from local shops and purchase the materials according to the lowest quotation. Where there are no available competitive sources ofsupply the household beneficiary may purchase the materials directly from the only source available. The household beneficiary may employ certified technicians to carry out the works which will be supervised by themselves under the technical guidance from the county-level PMO in accordance with the technical standards set out in the implementation agreement. The OMCP provides the details ofimplementation and the household beneficiary shall comply with these requirements. If some materials are unavailable, the county-level PMO, at the request ofthe household beneficiary, may help purchase those materials in large packages and provide such materials to them. In such cases, the county-level PMO shall follow appropriate procurement methods in procuring these materials. Depending on the size ofthe contract, they shall either follow shopping (for contracts up to US$lOO,OOO) or NCB (for contracts exceeding US$lOO,OOO).

(d) Payment Schedule and Conditions. The first installment, which will be between 30% and 50% ofthe grant, will be made to each household upon the signing ofthe implementation agreement, and the reminder will be made upon the

57 completion ofthe work as evidenced by a satisfactory inspection report issued by the county-level PMO.

(e) Review and Disclosure. Reviews will be carried out by the county-level PMO to verify the implementation ofthe work and the use ofthe grant on a six-month basis and will be undertaken by external consultants hired by the county-level PMO. A six-monthly inspection report will be available for review by Bank supervision missions. In addition, records of such reviews shall be made available to the public.

5. Non-consulting Service. Non-consulting services procured under this project include the collection oftourism information and will be financed by the counterpart fund.

6. For protection and preservation of intangible cultural heritage such as the collection ofintangible heritage resources and training hosted by the local master, the relevant activities will be carried out by village communities through community participation in accordance with the following procedures:

(a) Signing of Implementation Agreement. Based on an annual work plan approved by the PPMO and the Bank, the county-level PMO will sign an implementation agreement with the Community Project Management Group (CPMG), which will coordinate and monitor the implementation ofthe agreed activities for intangible cultural heritage protection. The implementation agreement will include: (i)the list ofthe selected activities; (ii)total cost of the activities and the type and amount ofexpenditures to be financed from the loan proceeds; (iii)activity implementation schedule; (iv) agreed outputs and reporting and verification requirements; and (v) payment schedule and conditions..

(b) Implementation. Village communities will mobilize local villagers, use local resources (local masters) and purchase materials if necessary through local shopping to implement the activities as specified in the signed implementation agreement under guidance from the county-level PMO.

(c) Payment Schedule and Conditions. The first installment, equal to 50% ofthe grant, will be made to each village upon the signing ofthe implementation agreement, and the reminder ofthe grant will be made available when the agreed outputs stated in the implementation agreement have been produced and as evidenced by a satisfactory inspection report issued by the county-level PMO.

(d) Review and Disclosure. The county-level PMO will carry out six monthly reviews, together with financial departments, to verify the implementation ofthe activities and the use ofthe grant. The review report will be provided to the Bank supervision mission within one month after completion, and be also made available to the public.

58 7. Procurement of Goods. A total ofUS$759,000 has been allocated for the purchase ofgoods under this project. The goods required include: electronic monitoring security systems; electronic exhibition systems; office equipment; hardware for IT systems; software; temperature and humidity monitoring devices; first aid equipment; and vehicles. Procurement will be undertaken using the Bank’s SBDs for all ICB and the MBDs as agreed with or satisfactory to the Bank for all NCB. Procurement in accordance with shopping procedures will also be applied for this project and a sample of a quotation document request shall be prepared and agreed by the Bank before implementing the related procurement. Any contract for goods estimated to cost US$500,000 equivalent or more will be procured under ICB. NCBprocedures will be used for procurement of goods costing less than US$500,000 equivalent per contract. Other goods will be procured using shopping procedures with contracts under US$1 00,000 equivalent per contract.

8. Consultants’ Services, Training, and Study Tours. A total ofUS$3.5 million has been allocated to the procurement ofconsultants’ services, training and study tours. The consultants’ services will typically include: (a) technical assistance for project implementation and capacity building and strengthening and training for tourism sector staff; (b) revision of the Guizhou Tourism Development Master Plan; (c) development of guidelines for the conservation oftraditional buildings and environments in minority villages; (d) tourism promotion in Qiandongnan Prefecture; (e) community coordinators/facilitators to mobilize and advise villages; and (f) technical specialists to assist in the conservation and rehabilitation oftraditional buildings. All consultants’ services will be provided by consulting firms. Qualification and Cost Based Selection will apply to contracts with an estimated cost ofUS$200,000 or above. Selection based on the Consultant’s Qualification may be applied to contracts with contract estimates below US$200,000. Qualification Based Selection may be applied particularly where universities and government research institutes that have the capability and qualifications to be considered for short listing for some ofthe consultancy assignments. Single Source Selection may be used under the specific circumstance specified in paragraph 3.10 ofthe Consultant Guidelines. The short lists of consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely ofnational consultants in accordance with the provisions ofparagraph 2.7 ofthe Consultant Guidelines.

9. Training and study tours will be conducted in accordance with the implementing agency’s administrative procedures. The PPMO will prepare an annual training plan and submit it to the Bank for review and approval. All training programs will be conducted and financed based on the plan approved by the Bank.

10. Incremental Operating Costs. In order to ensure that the PPMO has necessary financial resources to support effective project management, the following incremental operating will be eligible for Bank financing: (a) salaries of contractual staff; (b) project- related travel costs; and (c) office consumables. The available budget for incremental costs is US$150,000. The PPMO shall submit annual budgets for approval by the Bank, including a detailed description ofactivities. The actual expenditures incurred shall not

59 exceed the annual budget approved by the Bank. All relevant receiptshills shall be kept for Bank review.

1 1. Advertisement and Publication of Contract Award. The General Procurement Notice shall be published in United Nations Development Business online and dgMarket. In addition, it will be advertised in a national newspaper. All Special Procurement Notices for ICB, as well as Requests for Expression ofInterest for consulting services expected to cost more than US$200,000, will also be published in United Nations Development Business online and dgMarket. Advertisements for Requests for Expression ofInterest for consulting services will be advertised in a national newspaper, regardless of contract cost estimate. Contract awards will be published in accordance with paragraph 2.60 ofthe Guidelines for works and goods as well as with paragraph 2.28 ofthe Guidelines for consulting services.

B. Assessment of the Agency’s Capacity to Implement Procurement

12. Procurement activities will be carried out by the PPMO and Project Implementation Units (PIUs) for each subcomponent. Each PIU has assigned three to five staff to be responsible for procurement management.

13. An assessment ofthe capacity ofthe implementing agency to implement procurement actions for the project was carried out by the Bank on March 3-7 and April 1-7,2008. The assessment reviewed the organizational structure for implementing the project and the interaction between the project staff responsible for procurement and relevant county, city and provincial entities for administration and finance.

14. The key issues and risks concerning procurement for implementation ofthe project in the PIUs and the PMOShave been identified and include: (a) insufficient experienced staff for procurement; (b) lack ofprocurement knowledge and procedures for Bank-financed projects; and (c) insufficient staff for project management and contract administration. For the agencies which are responsible for the implementation of contracts awarded through community participation, the key issues and risk have been identified and include: (a) no experienced member for project management, including procurement management in the CPMG set up in the village; (b) no procurement knowledge and understanding ofthe World Bank’s principles and objectives of sound project management among relevant people; (c) insufficient experienced procurement staff members in the county-level PMO, who are expected to provide necessary guidance and assistance to village organizations and; (d) uncertainty of availability ofprofessional and experienced community coordinator/facilitator.

15. The corrective measures which have been agreed with the PPMO are as follows:

(a) The PPMO will recruit staff that has experience ofprocurement and construction management for similar projects;

60 (b) The PPMO will prepare a procurement manual, which will be finalized in accordance with the comments from the Bank. This manual will be distributed to the PIUs or agencies for reference; (c) Using counterpart funds, the PIUs will employ an experienced design institute to provide engineering design including the preparation of the technical requirements in the bidding documents. The PPMO will assign an experienced tendering company as a procurement agent. This will help ensure the quality of procurement and the staffing of the PIUs and will also simplify the working procedures; (d) The PPMO will employ an international consultant to provide technical assistance for project management; and (e) Procurement training will take place prior to project implementation. The Bank’s Beijing Office presented a procurement workshop to the procurement staff ofthe PMOs and the PIUs in December 2007 and March 2008 in Guizhou Province. Training of current procurement staff from the PIUs and the PMOs on procurement knowledge and procedures of Bank financed projects will be also conducted by the PPMO. Additional training would be provided by the Bank during project implementation, if necessary.

16. For the agencies responsible for the implementation of contracts awarded through community participation, the following corrective measures were agreed with the PPMO:

(a) Training of procurement staff in the county-level PMO on procurement knowledge, procedures for Bank-financed projects, and monitoring and evaluation of implementation; (b) Training of CPMG members in villages on procurement knowledge and procedures for Bank-financed projects; (c) Finalization of, Bank approval for, and distribution of the OMCP to all village communities, and support for the villages to understand and use the OMCP; (d) Appointment of a community coordinator/facilitator in each village for the assistance and supervision of project implementation; and (e) Employment of additional professional engineers for supervision of the project during implementation.

17. The overall project risk for procurement is rated as m.

C. Procurement Plan

18. The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan was agreed between the Borrower and the Bank on March 19,2009 and is available at the PPMO in Guiyang, China. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated annually, in agreement with the Bank, to reflect the actual project implementation needs and improvements in institutional capacity. The Procurement Plan is provided in Table C below.

61 D. Advance Contracting and Retroactive Financing (If any)

19. Retroactive financing will be applied for expenditures incurred after December 1, 2008 for construction of civil works under the Guanling National Geo-Park Heritage Protection, village tourism project model design, and domestic and foreign training program for staff of Guizhou Province tourism industry. Advance contracting will be in accordance with the Bank’s Procurement Guidelines. Proposed advance contracting and retroactive financing are summarized in Table B. The estimated expenditures are approximately US$899,000, which is below the threshold of 20% of the total loan of US$60 million under the World Bank Operational Policy 6.00. The local government of the above project has been made aware that payments made in expectation of retroactive financing is at the Borrower’s risk, and does not commit the Bank to making a loan for the project or to finance such payments.

E. Frequency of Procurement Supervisions

20. In addition to the prior review supervision to be carried out by the Bank on an ongoing basis, the capacity assessment of the implementing agency has recommended one supervision mission every six months (including the special procurement supervision for ex-post review) to visit the field.

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a 0 .I CI .-a L nf P mE Annex 9: Economic and Financial Analysis CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Economic Analysis

Development Context

1. Renowned for its variety of ethnic minorities and its unique heritage, Guizhou has recently been promoting tourism while also preserving and protecting its cultural and natural heritage. The tourist sector has been made a priority in the 11 th Five Year Plan of the province. According to the plan, tourist earnings are expected to grow 25% per year from 2006-2010, and total tourism revenue is expected to exceed RMB 76 billion (or 23% of the province’s GDP) in 2010. In addition, the province developed a tourism development master plan in 2002 with the assistance of the World Bank and the World Tourism Organization. It also developed a rural tourism development plan in 2006 to guide the protection and development of the cultural and natural heritage in the province.

2. According to statistics from the Guizhou Provincial Tourism Bureau, the tourism sector is growing rapidly, making Guizhou one of the most popular tourist destinations in China. Since the early 1980s, the number of tourist visits5 by domestic visitors has grown at an average rate of 16% per year from 2 million in 1984 to 62 million in 2007. Meanwhile, the number of international visitors increased from 1,500 in 1980 to 430,000 in 2007, representing an average increase of 22% per year. While the overall trend has been upward, growth has occasionally fluctuated due to changes in the external environment. For instance, there was a significant drop in 2003 due to the SARS outbreak. But the growth, driven mainly by domestic tourism, has since been spectacular, with an average annual increase of 36% from 2004 to 2007 (Table A). This is much higher than the master plan’s projected annual growth rate of 15%. Correspondingly, tourism earnings increased by over 30% per year from 2000 to 2006 and have become a key source of revenue for the Guizhou economy. In 2007, tourism earnings were around RMB 51 billion, which contributed to about 19% of the province’s total GDP.

Table A: Development of Tourist Numbers and Revenue in Guizhou

Sources: Guizhou Tourist Yearbooks from 2000 to 2006

’Note that the number of “visits” may be larger than the number of individual people visiting: visitors who visited more than one site during their trip to Guizhou or visited one site more than once within a year are counted separately.

80 3. Despite the overall development strategy and the rapid development oftourism, many challenges remain to ensure that sustainable tourism development is promoted and that the cultural and natural heritage ofthe province is protected. These challenges include poor living standards and environmental conditions in many proposed project sites, low awareness and appreciation ofminority cultural heritage, poor infrastructure and facilities to protect and promote heritage, and inadequate management, including weak institutions at the grass-roots level.

Economic Benefits and Costs

4. The project is designed to increase economic benefits to local communities by encouraging tourism and protecting Guizhou’s cultural and natural heritage. It is expected to generate a variety ofbenefits for the project beneficiaries, including local ethnic minorities, domestic and international tourists, local communities and governments, and tour operators in project areas.

5. Economic Benefits Identified. In general, the economic benefits ofthe project are associated with local economic development and increases in income which result from tourism activities, local skills enhancement, cultural heritage protection and development, natural ecosystems conservation, institutional strengthening, and improvement ofliving standards and environmental health in areas that are remote or have many ethnic minorities.

6. Some ofthe economic benefits are direct use benefits enjoyed by both local communities and tourists. Some ofthese benefits are monetized as admission fees to the sites or as increases in economic rents captured by service providers. Other benefits are not monetized and include increases in consumer surplus to both residents and visitors. Some ofthe economic benefits are indirect and include the ecological and environmental benefits provided by improved natural heritage preservation. There are even economic benefits due to non-use values which do not involve directly using the sites in any way. This means that some people appreciate and are willing to pay for the existence ofethnic minority cultures even if they may never plan to visit the site. Economists usually refer to these as bequest values and existence values.

7. Even for direct use values, these economic benefits may be further divided into monetized and non-monetized benefits. Monetized benefits are mainly those with cash returns to local residents or other service providers in the form ofadmission fees. Alternatively, these benefits can be increased net revenues from the provision ofcultural shows, foods, accommodation, parking, souvenir and handicrafts sales, etc. - all ofwhich are due to the improved protection provided by the project. Some ofthese economic benefits are easy to quantify, such as admission fees or other extra tourism area feeshaxes. Others, such as those associated with increased or more sustainable provision ofservices, are harder to estimate.

8. It is also recognized that to a visitor the value ofenjoying cultural heritage is usually larger than the amount ofactual (monetized) expenditures ofthe visitor. This

81 “extra benefit” is called consumers’ surplus in economics. Although difficult to measure, some estimates can be made using various valuation techniques, including contingent valuation method (CVM) surveys and the travel cost approach.

9. The main economic benefits ofprotecting cultural and natural heritage, as well as their beneficiaries and valuation techniques, are summarized in Table B below. These vary fiom site to site due to the differences in the characteristics as well as the actual investments made. It should be noted that the table does not list benefits other than those directly associated with the protection and development ofcultural and natural heritage. Other benefits, such as improvement of living conditions and public health oflocal people, are not valuated in the analysis.

Table B: Economic Benefits of Protecting Cultural and Natural Heritage Type of Benefits I Description of Benefits I Beneficiaries I Valuation Techniques Direct Use Benefits Monetized Admission fees and any Mostly tourists Measure direct special “tourism tax” payments of visitors applied to goods and and estimate the services; in addition, the “economic rent” “extra profit” (or economic portion where rent) from the values of appropriate cultural and natural heritage-related services provided by local communities and paid for by tourists Non-monetized Extra values of cultural and Tourists and CVM natural heritage-related residents services provided by local communities and NOT paid for by tourists or residents (Le. consumer’s surplus) Indirect Benefits Benefits of ecological and People living outside Not quantified in the environmental the project areas analysis but could be improvement (i.e. bequest done using various values and existence values valuation techniques of cultural heritage)

10. Proiect Costs. The cost side ofthe project is relatively simple. The costs ofthe project are mainly capital investment and operation and maintenance (O&M) costs. The project does not identify any major direct or external environmental and social costs created by new construction.

General Assumptions, Basic Data and Methods Used

11. The economic analysis assumes that market prices for the main elements ofcosts and benefits are not at much variance with their economic values. Therefore, shadow prices and conversion factors were not applied. The economic benefits and costs are valued at base year 2007 price levels. All ofthem are net amounts, factoring in inflation, duties, and taxes. The duration ofthe project components can be 20 to 35 years after

82 completion ofconstruction, depending on the nature ofinvestments. Replacement costs are included during the period according to the estimated lifespan ofequipment. To be conservative on economic returns, a time horizon of 20 years was used in the cost-benefit analysis.

12. The discount rate accepted by the Chinese government for most ofits projects is normally 8%.6 The rate can be as low as 6% for projects with long-term social and environmental benefits. Accordin to the (draft) Ministry of Construction Guidelines for evaluation ofscenic park projects f , the acceptable rate ofeconomic return can be 4% to 6% given the importance ofthese projects to nature conservation. For a project featuring cultural and natural heritage protection and tourism development, the benchmark for economic return is set at 8%.

13. Methodoloav. Economic valuation ofa cultural and natural heritage project is more difficult than for a traditional infrastructure investment project, such as water supply and sanitation. This is because a cultural and natural heritage project is complicated, involving not only direct use values of cultural and natural heritage to tourists and local residents, but also indirect and optional and existence values to people who may never visit the site. Also, there is normally a greater fluctuation and uncertainty in the number ofbeneficiaries (i.e. tourists) due to many external factors like economic recessions and outbreaks of epidemic diseases. Therefore, both quantifying economic values and projecting the number ofvisitors are difficult tasks for a cultural and natural heritage project. Also, given the large number ofproject sites involved and the wide range of basic infrastructure investments (such as access roads, water supply and sanitation facilities, waste collection networks, building rehabilitations, fire safety, hiking trails), it is difficult to conduct a full cost-benefit analysis for each and every component ofthe project. Therefore, a cost-effectiveness approach and a cost-benefit analysis were used in the economic analysis.

14. For most ofinvestment components, the cost-effectiveness approach was used to ensure that the least-cost options were adopted. In particular, the guidelines oflower cost infrastructure options were provided to local design institutes and entities during project preparation and design. In the guidelines, design and technical alternatives (such as construction materials), technical standards (such as the width ofaccess roads and hiking trails), and technologies (such as types oftoilets) are recommended to help reduce the cost ofeach construction component in the project design process.

15. To quantify the economic benefits and economic return rates, cost-benefit analysis was undertaken for several representative components. These include Wanfenglin Scenic Park Area, Langde Miao Ethnic Minority Village, Zhaoxing Dong Ethnic Minority Village, and Anshun Jiuzhou Ancient Town. As noted, the project will provide non-monetized benefits to tourists and local residents and even non-use values to others, all ofwhich are difficult to quantify. Both the survey-based (willingness-to-pay)

China National Development and Reform Commission and China Ministry of Construction, 2006. Economic Analysis of Construction Projects: Methods and Parameters. Beijing: China Planning Press. Ministry of Construction, 2007. Evaluation Methods for Scenic Site Construction and Protection Project.

83 approach and the travel cost approach were employed at the representative project sites in an attempt to monetize some of these benefits (Le. consumer’s surplus) -thereby offering a better picture of heritage protection investments to visitors and local residents. However, because of poor datasets, the travel cost study results cannot be easily used.

16. Proiection of Tourist Growth. Although many direct benefits such as admission fee revenues can be quantified, one of the most critical but uncertain parameters used in valuing these direct economic benefits is the projected number of future visitors to each site. It is difficult to project future tourism growth and estimate the contribution of the project to growth in economic values. The cost-benefit analysis has to make some strong but conservative assumptions due to the lack of reliable statistical data and good models as well as the difficulty in assessing any impact on increases in the number of site visits. As noted, Guizhou has been experiencing very rapid growth in its tourism sector in recent years (about 36% per year over the last four years). This rate is much higher than planned in the province’s tourism development master plan, which aims to achieve a more steady and sustainable growth. A simple extrapolation of the recent tourist growth will present a high growth scenario which is unlikely to be realistic and sustainable in the long run given the local carrying capacity.

17. Therefore, in this analysis, the annual growth of tourists is projected and controlled at a sustainable and conservative level based on discussions with local authorities and research institutes. It is generally assumed that the long term growth rate of tourism is to be a diminishing trend but one which varies by site according to its development situation (such as carrying capacity) and the investments made at the site. For example, annual growth rates of 10% in 2009-201 8 and 5% in 201 9 to 2027 are assumed in the analysis of Langde Miao Village.

18. Contribution of the Pro-iect. Many sites have already developed their tourism attractions and are already receiving visitors prior to the project. Therefore it is a complex issue to analyze the changes that are directly caused by the project investment and estimate that share ofthe total incremental benefits. Again, this is a complicated task which has to be determined site by site, by taking into account the share of the project investment in the total investment of the site, the relative importance ofthe investment in terms of attracting visitors, and the expected lifespan of the investment, among other things.

19. The economic costs of the project mainly consist of capital investment during the construction period and O&M costs in the project implementation period. The project involves no resettlement or land acquisition and therefore there are no major environmental costs. The construction period of the project is on average four years. However, this may vary at some sites due to the nature and size of the proposed investments. The duration of the project is 20 to 35 years depending on the investment components at each site. Again, to allow for conservative projected economic returns, a time horizon (period of the analysis) of 20 years has been used in the cost-benefit analysis.

84 20. The incremental direct economic benefits oftourism development were estimated based on pricing and statistical data provided by local tourism bureaus and on the projection ofvisitors during the project period. For example, the admission fee is based on the current fee level and the projection offuture increases. Although only used indirectly in the economic analysis (via an estimate of an “economic rent” premium due to the project), average expenses per tourist on food and accommodation are based on statistical data at the site or at the county level. The non-monetized benefits (consumer’s surplus) ofheritage protection were estimated based on the results ofa CVMapproach study that estimated the willingness-to-pay (WTP) values ofboth tourists and residents for cultural heritage conservation. Other indirect benefits such as improvement of local public health were not quantified due to a lack of data.

Willingness-to-Pay Survey at Selected Sites

2 1. As discussed, economic questionnaires for both tourists and local residents were used to value indirect benefits. Three sets ofquestionnaires were designed: for local residents; for tourists at individual tourist destinations; and for tourists departing from the local airport. For tourists, the questionnaire included background information on a number ofvariables including their trip information and expenses, their point-of-origin (what province they came from), the number ofpeople in their party, sites visited, duration ofstay (in Guizhou, at the surveyed site, and at other sites), travel costs and other expenses (in Guizhou, at the site, and at other sites), and so on. In addition, a CVM survey was also conducted to estimate the value oftheir WTP for the protection of cultural and natural heritage at the survey site. For local residents, the questionnaire focused on their WTP for the conservation ofcultural and natural heritage at their local sites. A pre-test was conducted for the draft questionnaires, and then the questionnaires were finalized. The surveys were carried out by a local design institute under the guidance of Chinese and international consultants in September-November, 2007. About 1,000 questionnaires were completed and the number and locations ofthose surveyed are summarized in Table C.

Tourists Local Residents Planned Actual Planned Actual Langde 120 164 80 77 Zhaoxing 50 41 50 50 Wanfenglin 80 81 120 100 Libo* 100 129 nla nla Jiuzhou nla nla I 30 Airport and selected hotels in Guiyang City 300 283 nla nla Ofwhich international visitors 66 I Total 750 729 250 257 * dropped from the project.

85 22. The results of the WTP surveys are presented in Table D. They show that both tourists and local residents are willing to pay for preserving cultural and natural heritage. The amount they are willing to pay varies by site. For example, in the Wanfenglin area, tourists are willing to pay an average of RMB 24 and local residents RMB 12 for natural heritage preservation. At most sites, a much higher percentage of local residents are willing to pay for natural heritage conservation than tourists. This is probably because the project sites are seen as more important to their daily life. But the WTP values for local residents are generally lower because of their lower income levels compared to visitors from other parts of China (or international visitors). A possible reason why a significant portion oftourists are not willing to pay at some sites (e.g. Zhaoxing) is because they may consider that the entrance fee they have already paid should be used to finance the protection of natural and cultural heritage.

Table D: Willingness to Pay Values by Survey Site Langde Zhaoxing Wanfenglin I Jiuzhou

Average /o with Average 0 Average % with Average %with WTP /o with WTP WTP WTP WTP WTP WTP WTP value values values values (RMB) (RMB) (RMB) Tourists 76.8 10.7 13.5 44 30.9 24.2 I* I* Residents I 88.2 I 17.1 I 100 I 18.4 I 85 I 11.8 I 85.0 I 27.8 1 * The survey was not conducted at this site because there are currently too few visitors.

23. The average WTP estimates varied from RMB 11 to over RMB 44, depending on the site. Although there is some uncertainty about the results it is assumed that for tourists who will probably only visit the site once in many years these are “one time payments”. However, for local residents, who depend on the same sites for their livelihood, the WTP number is considered an annual value.

24. In addition to the contingent valuation (WTP) approach, another approach collected information on travel costs and local expenditures. Tourists were asked about the total costs of their trip (this varies depending on whether they were from Guizhou or another province), the list of tourist destinations visited, and the number of days spent at a particular site. The total travel cost was then distributed to all sites visited in order to estimate the share ofthe travel cost at the study site. The average travel costs of study sites are listed in Table E. For example, in Zhaoxing Dong Ethnic Cultural Village, the average travel cost per visitor fiom other provinces in China is RMB 359 while the average travel cost per visitor from Guizhou province is RMB 118. This expenditure data indicate that many visitors are willing to travel a significant distance to visit Guizhou, and that they clearly valued the sites visited. It is not possible, however, to estimate the economic rentkonsumer’s surplus generated by these visits from the data collected.

86 Table E: Average Travel Costs per Visitor Average travel Site Origin of visitor costs per visitor (RMB) Domestic but Langde outside Guizhou I 444 I Guizhou I 360 I Domestic but Zhaoxing outside Guizhou I 444 1 Guizhou Domestic but Wanfenglin outside Guizhou Guizhou I 332 I

Cost-Benefit Analysis of Selected Project Components

25. Four sites, representing typical project components, were selected as samples for the cost-benefit analysis. The four sites were Wanfenglin Scenic Park Area, Langde Upper Miao Village, Zhaoxing Dong Minority Village, and Anshun Jiuzhou Ancient Town. WTP surveys were conducted at these four sites, and a cost-benefit analysis was carried out for each of them. The results oftheir economic analysis are briefly presented below.

Wanfenglin Scenic Area in Xingyi City, Oianxinan Prefecture (southwest)

26. Wanfenglin (Thousand Peaks Forest) Scenic Area is located in Xiyi City and Anlong County of Qianxinan Buyi and Miao Prefecture. It is a national Geo-park with magnificent karst landscapes and rich Buyi minority culture. The area comprises Maling River Valley, Dongfenglin (East Peaks Area), Xifenglin (West Peaks Area), and Wanfeng Lake with a total area of about 450 km2.Despite its natural beauty, tourism here was undeveloped as it did not become a priority in the region until the early 2000s.

27. Tourism has since grown at an immense 73% in 2004-2006 and park admission fee earnings grew by 110% during the same period. However, despite the fast growth in the early stage of development, insufficient tourist infrastructure is emerging as a bottleneck in the area.

28. The project component would significantly improve infrastructure and protect cultural and natural heritage in order to promote tourism. The project will invest in: the construction of a tourist information center and a Buyi ethnic culture center; the construction and restoration of bridges over Nahui River; bike trails and footpaths; river bank ecological management; and the integrated protection and development of local villages. The direct economic benefits of the project are mainly the incremental tourism revenues from admission fees, as well as any extra “economic rents” generated from the

87 enjoyment of natural beauty, cultural heritage, accommodation, food, parking, and souvenir and handcraft sales. The indirect benefits are the extra, non-monetized values of natural and cultural heritage protection to visitors (exceeding what they have paid) and local residents - that is, the consumer’s surplus of tourists and residents. The result from the WTP survey was used to quantify the indirect benefits received by both residents and visitors. The project’s life span is 20 years, after the construction period of four years.

29. Tourist Numbers and Growth Rate. The number of tourist visits to the scenic park was about 90,000 in 2007. The area’s impressive landscape and large carrying capacity make it a potential center of tourism growth in the province, as long as the project significantly improves local tourism infrastructure and protects natural and cultural heritage. In the economic analysis, it is assumed that the annual growth rate of tourist visits would be 15% in 2009-2015, 10% in 2016-2025, and 5% in 2026-3 1. It is also assumed that the project would be attributable to half of the growth. Given the outstanding performance of tourism in the area, the assumptions appear to be very conservative.

30. Admission Fee and Other Net Tourism Earnings. The park charges an admission fee for sightseeing, rafting, and other activities. The average cost per visitor is RMB 82 and the fee is expected to be raised by RMB 20 upon completion of the project. It is assumed that 75% of visitors to the area would enter the park and pay the admission fee. According to local statistics, visitors also pay an average ofRMB 103 per person for their accommodation, food, and shopping in the park area. This generates a net tourism income of about RMB 21 for the city.

3 1. Consumer s Surplus. The WTP survey in the scenic park shows that 3 1% of tourists are willing to pay an average of RMB 24.2 for the protection of natural and cultural heritage in the park area. This is in addition to the admission fee already paid by visitors.

32. Costs. The total fixed capital investment is RMB 80.5 million. The incremental O&M costs are about RMB 5.2 million per year from 2012 onwards.

33. The results ofthe economic analysis are presented in Table F. They show that the economic internal rate of return (EIRR) is a healthy 13.7%.

88 Table F: Economic Analysis Results (EIRR)

Fixed capiral investment [Yml 16.12 20.14 24.17 20.14 Incremental vanable costb [Yml 5.20 5.39 5.42 5.45 5.66 5.92 6.01 6.01 Total ecommfc cost [Yml 16.12 20.14 24.17 20.14 5.20 5.39 5.42 5.45 5.66 5.92 6.01 6.01

Direct tourism earnings Earnings fmm admissionfees lrml 170 5.18 6.88 8.83 1Z98 32.72 43.45 45.93 Net earningsfrom other servicespmvided w visitors pm] 0.25 0.53 0.86 1.24 3.01 5.86 7.94 8.42

Total monetizedeconomic benefits lrml 3 95 5.71 7 74 10.07 2099 38.58 51.39 54.35

Non-monetized benefits of heritage proteetion Vlsltors' consumer surplu? lrml 1.39 1.60 1.81 2.11 3.40 5.48 6.99 7.34 Local residents' WP PmJ 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04

Total non-monetized benefits lrml 142 163 187 215 344 551 703 738

Total economic benefits [Ym] 173.6 0.00 0.00 0.00 0.00 5.37 7.34 9.61 12.22 24.43 44.09 58.42 61.73 Net economic flows [Ym] 66.9 -16.12 -20.14 -24.17 -20.14 0.17 1.95 4.19 6.77 18.77 38.17 52.41 55.72 EIRR [ %] 13.7%

34. Sensitivity analysis was conducted for two scenarios - a 10% decrease in projected growth rate of tourist visits and a 10% increase in total project cost - as they may be the key parameters affecting the final results ofthe analysis. The sensitivity analysis results below show that the EIRRs remain above the 8% threshold. Although the non-monetized benefits derived from the consumer's surplus are legitimate values and project benefits, they are not collected by local communities. Even without counting this portion of extra benefits to visitors, the project would still yield an EIRR of 1 1.8%. Therefore, the project component should be considered economically justified and robust.

EIRR 13.7% 10% decrease in tourist growth rate 11.5% 10% increase in investment costs 12.5%

I Non-monetized benefits excluded I 11.8% I

Langde Upper Village Miao Cultural Heritage, Leishan County, Oiandongnan Prefecture

35. Located in Langde Town of Leishan County, Longde Upper Miao Village has about 757 residents. The village, which started over 640 years ago in the Ming Dynasty, has a long history and a rich Miao minority culture. The investment in the village consists of the construction and restoration of facilities (such as roads, footpaths, water supply, fire protection, sewage network, toilets, and solid waste collection); conservation, rehabilitation and protection of ancient and minority architecture; construction of public buildings and information centers; and intangible heritage protection.

36. The village's tourism activities began in the 1990s and have attracted many visitors since, mainly drawn by the Miao cultural heritage. It is estimated that the village attracted about 79,600 visitors in 2006. From 2001 to 2006, its growth rate was 15.2% per year due to good marketing efforts. However, with limited capacity to carry tourists, the rapid growth rate of the small village could not be sustained in the long term. To be

89 conservative, it is assumed that the future growth rate of visitation is controlled at 10% per year from 2009 to 2019, and 5% per year for the remainder of the period. It is further assumed that the project contributes to only half ofthe growth oftourism during the period.

37. Direct Tourism Earnings. A main source ofthe benefits ofthe project can be measured by the admission fees collected from visitors. Based on data provided by the local government and community, the admission fee in 2008 is about RMB 60 per visitor and about 90% of visitors pay the fee. The entrance fee will be raised by RMB 20 after the project construction is completed in 2012. In addition, the project helps sustain economic activities in the village. It is estimated that an average visitor spends another RMB 49.5 on site, of which RMB 10 is for food, RMB 12 is for accommodation, RMB 12.5 is for cultural shows, and RMB 15 is for souvenirs and handicrafts. Only a small portion of these expenditures are included in the analysis. Based on the assumption that the existence of the project allows vendors to charge more, it is assumed that 20% of expenditures form the “economic rent” contribution ofthe project. This 20% was included as an economic benefit ofthe project.

38. Consumer’s Surplus. The WTP survey in Langde shows that 77% oftourists are willing to pay an average of RMB 10.7 for the protection ofthe cultural heritage ofthe village. This amount is in addition to the visitor’s admission fee.

39. Costs. The total capital investment is RMB 26.17 million. The incremental O&M costs are about RMB 1.16 million per year from the year 2012 onwards.

40. The results ofthe economic analysis are presented in Table G. They show that the EIRR is 19.6%.

Table G: Economic Analysis Results (EIRR)

Economic cost Fmedmprtol rnwshnenl IYml 634 7.93 9.52 793 Incremental vanable costs [Yml 1.16 116 I16 1.16 116 1 I6 1 I6 116 Total cconomfc cos1 [Yml 634 7.93 9.52 7.93 1.16 116 1.16 116 116 116 116 116

3.00 3.76 4.60 5.52 10.97 15.27 20.77 22.03 0.06 0.13 0.21 0.29 0.79 1.19 1.69 1.81

306 389 481 581 1176 1646 2246 2384

Non-monetized benefits of heritage protection vfsrfors’s m P’ml 1.16 1.18 1.41 1.55 2.38 3.03 3.87 4.07 Lacnl -dents’ UTP Irm/ 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Told nonmanetired benenefih P’ml 118 129 142 156 239 305 389 408

Total economic benefits vm] 90.9 0.00 0.00 0.00 0.W 4.24 5.19 6.23 7.37 14.15 19.51 26.34 27.92 Net economic flows [Ym] 56.5 -6.34 -7.93 -9.52 -7.93 3.08 4.03 5.07 6.21 12.99 18.35 25.18 26.76 EIRR [ %] 19.6%

41. Sensitivity analysis was done for two scenarios - a 10% decrease in projected growth rate of tourist visits and a 10% increase in total project cost - as they may be key parameters affecting the final results of the analysis. Although the non-monetized

90 benefits derived from the consumer’s surplus is legitimate, they are not collected by local communities. If they are completely excluded from benefits, the project would still yield an EIRR of 16.9%. The sensitivity analysis, therefore, shows that the investment is both economically justified and robust.

I EIRR I 19.60% I 10% decrease in tourist growth rate 18.40% 10% increase in investment costs 18.30% Combined 17.10% Non-monetized benefits excluded 16.90%

Zhaoxing; Dong Ethnic Cultural Village, Lipinn County, Oiandongnan Prefecture

42. Zhaoxing Dong Village has about 4,000 residents. It also has a long history and is famous as a center of Dong minority culture showcasing singing, customs, and traditional architecture. Currently, the site has inadequate infrastructure facilities to protect and promote ancient architecture and intangible cultural heritage, both of which are under threat from booming tourism.

43, The main subcomponents of the proposed investment include: a culture and tourist information center; renovation and construction of communication facilities such as the main street of Zhaoxing Town and footpaths; construction of infrastructure such as water supply, sewers, wastewater treatment, fire protection, garbage boxes, solid waste containers; medical stations; river ecological protection and restoration; conservation, rehabilitation and protection of ancient architecture; and conservation and rehabilitation of private houses.

44. Again, the project economic benefits were measured by admission fees, net tourism earnings, and consumer’s surplus of visitors, as well as the WTP value of local residents for improving their living and environmental conditions.

45. The village attracted about 113,000 visits in 2006. From 2001 to 2006, its average growth rate was 26% per year. However, it is not likely that the rapid growth rate can be sustained in the long term. It is conservatively assumed that the future growth rate of visitation will be controlled at 10% per year from 2009 to 2019, and 5% per year for the rest of the period. It is further assumed that this project contributes to half of the projected growth during this period.

46. Direct Tourism Earnings. A main source of the benefits of the project can be measured by the admission fees collected from visitors. Based on the data provided by the local government and community, the average admission fee for entrance and cultural shows is currently about RMB 40 per visitor, and about 50% of visitors pay the fee. The fee is expected to be raised by RMB 10 after project construction completion in 2012. In addition, the project helps sustain economic activities in the village. It is estimated that an average visitor spends another RMB 105 on site for accommodation, food, souvenirs,

91 handicrafts, and other expenses. 20% of this becomes the net income (economic renuextra profit) and would be included as an economic benefit of the project.

47. Consumer s Surplus. The WTP survey in Zhaoxing shows that 14% of tourists are willing to pay an average of RMB 44 for the protection of the cultural heritage of the village. This amount is in addition to the visitor’s admission fee.

48. The results of the economic analysis are presented in Table H. They show that the EIRR is 12.6%.

Table H: Economic Analysis Results (EIRR)

Economic cost Fixed capilal inveslmenl [Yml 634 793 952 793 Incremental vanable COSIS [yml 197 199 201 203 214 344 361 361 Tolal economic cas1 [yml 634 793 952 193 197 199 201 203 214 344 361 361

Direct tourism earnings Earnings from admission fees lYmJ 123 158 196 239 189 687 940 999

Ne1 earnings from other servicesprovided to visifors pm] 0.19 0.40 0.63 0.89 2.39 3.58 5.09 5.43

Total monetized economic benefits lymJ 142 198 2.60 3 27 7.28 10.45 14.50 15.43

Non-monetized benefits of heritage protection Visilors‘s WTP FmJ 1.19 1.31 1.44 1.58 2.43 3.11 3.96 4.16 Local residents’ WTP (rmJ 0.07 0.07 0.07 0.07 0.08 0.08 0.08 0.08

Tolal non-monetized benefils lrml 126 138 151 166 251 318 404 424

Total economic benefits [Ym] 62.6 0.00 0.00 0.00 0.00 2.68 3.36 4.11 4.93 9.79 13.63 18.54 19.67 Net economic flows [Ym] 18.2 -6.34 -7.93 -9.52 -7.93 0.72 1.38 2.10 2.90 7.65 10.19 14.92 16.06 EIRR [ %] 12.6%

49. The results of sensitivity analysis show that the project component is economically justified and quite robust.

EIRR 12.60% 10% decrease in tourist growth rate 10.80% 10% increase in investment costs 11.30% I Combined 1 9.50% I

Jiuzhou Town, Anshun Municipality

50. Jiuzhou Town is located in southwest Xixiu District of Anshun Municipality. Jiuzhou is the oldest military fortress in the area, founded in the early Ming Dynasty over 600 years ago. The traditional “Tunpu” culture of old Han people, including architecture, customs, performances, etc is well preserved in the town. Through this project, Anshun plans to preserve the ancient town and develop it into a destination for tourists to experience Tunpu culture.

5 1. The project component includes: conservation and rehabilitation of traditional residential houses and public buildings; protection of intangible cultural heritage; reconstructiodconstruction of tourism facilities including footpaths and parking lots; and

92 improvement of basic infrastructure such as water supply, sewers, and sanitary facilities. The project life span will be 20 years, after the construction period of four years.

52. Tourist Numbers and Growth Rate. The town isjust beginning to develop its tourism business. Currently, there are few visitors but it is expected that the number of visits will gradually grow to 50,000 in 20 11. In the economic analysis, it is assumed that the annual growth rate of visitors would be 15% in 2009-2015, 10% in 2016-2025, and 5% in 2026-3 1, which means an average of 830 visitors per day in 203 1.

53. Admission Fee and Other Net Tourism Earnings. An admission fee of RMB 50 is expected upon completion of the project. It is assumed that 50% of visitors would pay the fee. In addition, visitors would spend RMB 89 per person for their accommodation, food, and shopping in the town, which generates a net tourism income (an economic renuextra profit) of about RMB 17.8 per visitor for the local community.

54. Consumer's Surplus. No WTP survey on visitors was conducted because there are few visitors in the town at present. Although 85% of local residents are willing to pay for the project at an average of RMB 27.8 per person per year, non-monetized values were not included in the analysis.

55. Costs. The total fixed capital investment is RMB 22 million. The incremental O&M costs are about RMB 2 million per year.

56. As shown in Table I,based on project costs, and estimated admission fees, economic rents from other activities and WTP estimates, the EIRR of the project is 10.1%.

Table I:Economic Analysis Results (EIRR)

MI 6.34 7.93 9.52 1.93 [Yml 1.97 1.99 2.01 2.03 2.14 3.44 3.61 3.61 [Yml 6.34 7.93 9.52 1.93 1.97 1.99 2.01 2.03 2.14 3.44 3.61 3.61

1,63 2,M 2.55 3.12 5.79 10.09 13.22 13.95 0.13 0.29 0.46 0.67 1.62 3.15 4.26 4.52

Totaldcbenehb [ynl 517 0.00 0.00 aoo aoo 1.76 234 3.02 3.79 7.41 13.24 17.49 1847 Neteammictlw Iynl 83 -634 -7.93 -9.52 -7.93 421 0.36 1.01 1.76 5.27 9.80 13.87 1486

57. The sensitivity analysis was conducted for two scenarios - a 10% decrease in projected growth rate of tourist visits and a 10% increase in total project cost - as they may be the key parameters affecting the final result of the analysis. Although the EIRR of the combined scenarios is 7.1% (still above the government threshold of 6% for social projects), the investment is more economically justified when the presently non- monetized (and non-estimated) values are included in the analysis.

93 EIRR 10.1% 10% decrease in tourist growth rate 8.4% 10% increase in investment costs 8.9% Combined 7.1%

58. In addition to the application of the least cost options in project design, the cost- benefit analysis of four selected representative sites further shows that the project investment will bring attractive economic returns, even when using conservative assumptions of tourism growth and economic benefits. This leads to the conclusion that the project is economically justified and will have a positive economic impact on the poor.

59. The project will improve the condition of local infrastructure and bring economic and health benefits to the entire population, including the poor, in the project areas. Most of the project investment will be shouldered by local governments and cause no tariff or tax increase on local residents, although a portion of the project loan will be disbursed through a grant program to those local residents who borrow for their own home improvement. To ensure that the project revenue will be shared fairly among local residents, a community-based participatory approach will be employed in project implementation. Accordingly, the project anticipates no negative impact on the poor.

Financial Analysis

General Assumptions, Basic Data and Methods Used

60. The project intervenes in heritage sites, landscapes, and minority villages. The World Bank's experiences in other Chinese cities, as well as in Lebanon, Egypt and Jordan, have shown that the private sector alone is unable to adequately preserve and develop these areas, nor can it ensure an equitable distribution of benefits (public good or otherwise) that emanate from those historic assets. Therefore, there is a strong case for public sector/government intervention to preserve and manage the assets and thereby enhance public welfare. Municipal financial analysis was thus carried out for the participating municipality/prefectures.

Anshun Municipality

61. The GDP of Anshun Municipality increased from RMB 7.875 billion in 2005 to RMB 12.374 billion in 2006, with an average annual growth rate of 19.04%. To be conservative, the GDP growth rate was predicted based on 2006 data, and assumed to be 7% in 2008-2010,6% in 201 1-2013, 5% in 2014-2017, and 3% in 2018-2024, respectively.

62. The on-budget revenue of Anshun grew from RMB 0.519 billion in 2003 to RMB 0.973 billion in 2006, with an average growth rate of about 29.2%. The on-budget revenue indicates a kind of correlation as it appears that the on-budget revenue is about

94 7% of the GDP. Since Anshun is designated as a poverty municipality in China, it will receive additional sources of revenue besides the on-budget revenue, as well as transfer payments from the central government although the amount will vary over the years, which will enhance the municipality’s financial resources.

63. The total investment capital is RMB 72.76 million, of which the World Bank loan is about RMB 48.60 million, and the counterpart fund is RMB 24.16 million. During the implementation period of the project (2010-2014), the annual counterpart fund will be RMB 4.41 million, RMB 6.04 million, RMB 7.35 million, RMB 5.86 million, and RMB 0.5 million, respectively, representing around 0.4%-0.58% of on-budget municipal revenues. During the repayment period (201 5-2039), the annual repayment amount will only be about RMB 2.94 million, representing about 0.2% of the on-budget revenues in that particular year. The counterpart financing and loan repayment are therefore considered well within the fiscal capabilities of the Anshun Municipal Government. In addition the municipal financial resources are to be augmented by transfer payments from the central government.

Qianxinan Prefecture

64. The GDP of Qianxinan Prefecture increased from RMB 8.565 billion in 2005 to RMB 14.048 billion in 2006, with an average annual growth rate of 21.3%. To be conservative, the GDP growth rate was predicted based on 2006 data, and assumed to be 7% in 2008-2010, 6% in 201 1-2013, 5% in 2014-2015, and 3% in 2016, respectively.

65. The on-budget revenue of Qianxinan Prefecture was RMB 1 billion in 2006, with an average growth rate of about 3 1.2%. The on-budget revenue indicates a kind of correlation as it appears that the on-budget revenue is about 7% of the GDP. Since Qianxinan Prefecture is designated as a poverty prefecture, it will also receive transfer payments from the central government, which will vary over the years.

66. In Qianxinan Prefecture, the total investment capital is RMB 106.32 million, of which the World Bank loan is about RMB 70.60 million, and the counterpart fund is RMB 35.72 million. During the implementation period of the project (2010-2014), the annual counterpart fund will be RMB 3.02 million, RMB 6.44 million, RMB 9.41 million, RMB 5.99 million, and RMB 0.5 million, respectively, representing around 0.26%-0.74% of on-budget municipal revenues. During the repayment period (20 15- 2039), the annual repayment amount will only be about RMB 4.28 million, representing about 0.2%-0.3% of the on-budget revenues in that particular year. Therefore, the counterpart financing and loan repayment are considered to be well within the fiscal capabilities of the Qianxinan Prefecture Government, especially considering transfer payments fiom the central government.

Qiandongnan Prefecture

67. The GDP of Qiandongnan Prefecture was RMB 16.61 billion in 2006, with an average annual growth rate of 16.78%. To be conservative, the GDP growth rate is

95 assumed as 10% in 2008-20 10,9% in 201 1-2015,8% in 2016-2020,7% in 202 1-2025, and 6% in 2026-2027, respectively.

68. The on-budget revenue of Qiandongnan grew from RMB 0.94 billion in 2003 to RMB 1.89 billion in 2007, with an average growth rate of about 19.08%. With rapid GDP growth, it is assumed that on-budget revenue will grow at a rate of 16% from 2008 to 20 16.

69. The total investment capital is RMB 308.3 1 million, of which the World Bank loan is about RMB 217.87 million, and the counterpart fund is RMB 90.44 million. During the repayment period (201 5-2039), the annual recurrent expenditures will represent 1.16% of the on-budget revenues and 0.12% of the GDP. The Bank loan represents 3.62% of the on-budget revenues and 0.73% of the GDP. Therefore, the counterpart financing and loan repayment are considered well within the fiscal capabilities of the Qiandongnan Prefecture Government. Considering transfer payments from the central government, the prefectural financial resources are strongly guaranteed.

96 Annex 10: Safeguard Policy Issues China: Guizhou Cultural and Natural Heritage Protection and Development Project

Environmental Safeguards

1. The proposed project is classified as a Category A project under OP/BP 4.01 Environmental Assessment, considering that some proposed subcomponents are located at significant sites with cultural relics and sensitive natural environments. However, most subcomponents are simple with small investment scales. Based on environmental screening, four Bank safeguard policies are triggered: (a) Environmental Assessment (OP/BP 4.01); (b) Involuntary Resettlement (OP/BP 4.12); (c) Physical Cultural Resources (OP/BP 4.1 1); and (d) Indigenous Peoples (OP/BP 4.10).

Environmental Assessment

2. The project feasibility studies were prepared by Chinese design institutes and an institute specializing in Environmental Assessment (EA) was hired by the project entity. This institute has subsequently carried out the preparation ofEnvironmental Impact Assessment and Environment Management Plan documents for the entire project - documents independent ofthose’for the feasibility studies. As a Category A project, an EA report, an EMP report, and an EA summary have been prepared according to the Bank’s policy and requirement. The environmental safeguard documents identify potential environmental benefits and consequences ofthe project, propose measures to avoid, mitigate or otherwise compensate negative environmental impacts during construction and operation, and allow incorporation ofappropriate measures in the design to keep the negative impacts to a minimum and acceptable level. The documents have been prepared on the basis ofthe country’s legal and policy frameworks for pollution control and environmental protection, master plans and conservation plans, as well as applicable World Bank safeguard policies. Technically, the environmental safeguard documents have applied methodologies set out in various technical guidelines issued by the State Environmental Protection Administration and World Bank safeguard policies/technical sourcebooks. The scope ofthe project covered by the EA report is based on the feasibility studies for the project components.

3. In addition to the environmental safeguard documents mentioned above, a Strategic Environmental Assessment was conducted by the international consultant who evaluated Guizhou’s economic development plan, cultural and natural protection and development plan, and tourism development plan - all from an environmental perspective.

4. Policy Framework and Institutional Responsibility. The EIA Law, issued in October 2002 and effective on September 1, 2003, is applicable to all construction projects that may cause a negative impact on the environment. According to the Management Regulation on Environmental Protection for Construction Projects, issued on November 29, 1998, by the State Council, an EIA must be prepared during the project

97 feasibility stage. EIA approval is a necessary prerequisite for securing a construction and operation permit.

5. Guizhou Provincial and MunicipaVPrefecture Environmental Protection Bureaus (EPBs) are in charge of: drafting and issuing local laws and regulations; organizing environmental monitoring and control; supervising the treatment of pollution; dealing with major pollution incidents; and carrying out education and training in environmental protection. Accordingly, within its duties, the Guizhou EPB reviews and approves the EA documents prepared for the project.

6. Brief Project Description. The details of the project are provided in Annex 4. The physical investments are generally small, and primarily limited to: upgrading of access roads and tourist footpaths; provision of small-scale water supply, sanitation, wastewater collection and treatment, fire fighting facilities, and other environmental services; provision of tourist facilities such as service centers and exhibition facilities; environmental restoration; and conservation works on relics. The project has been designed to ensure a minimum footprint on the sites, and to minimize negative environmental impacts of individual investments.

7. Baseline Environmental Conditions. Guizhou is located in southwest China and borders Sichuan, Chongqing, Hunan, Guangxi, and Yunnan provinces. It has a total area of 176,100 km2,and an average altitude of 1, 100 m. About 92.5% of Guizhou is mountainous, and 61.9% features karst topography - the most notable feature of Guizhou’s physical environment. Guizhou is located in the subtropical monsoon zone, characterized by a warm and humid climate.

8. Guizhou has an abundance of surface water which primarily flows within two river systems, the Yangtze and Pearl River basins. Although surface water quality is generally good according to national standards, the water quality at the urban sections of the rivers is a serious environmental issue.

9. Guizhou has one of China’s most pristine environments. The botanical resources of the province are well known and include a large amount of rare flora, ancient trees of historic and cultural value, and a vast landscape of forests. Guizhou also provides a habitat for a large range ofwildlife. Protected fauna include Golden Monkeys and assorted bird life. Investigation shows that there are no protected ancient trees or rare flora in project towns/villages. Although some of the project locations have ancient trees they are far from construction sites or are well protected. No significant impacts are anticipated.

10. In 2004, out of Guizhou’s total population of 39 million, 26% were urban residents. Guizhou is home to 49 ethnic minority groups with a population of 13.39 million, which accounts for 36.77% of Guizhou’s total population. Ethnic groups whose population exceeds 100,000 include the Miao, Buyi, Dong, Tujia, Yi, Gelao, Shui, Hui and Bai.

98 1 1. Guizhou has a predominantly agriculture-based economy. Development of industry (apart from mining and heavy industry) and the service sector (especially tourism) are lagging behind the rest of China. Despite exceptional fast growth in recent years, Guizhou remains the poorest province in China, with an annual per-capita GDP of only US$3,603 in 2005 compared to US$9,101 for the rest ofthe country. The Human Development Index ofGuizhou - which compares levels ofculture, education, and science - is greatly below China’s average.

12. Analysis ofAlternatives. Impacts on the environment “with and without the project” have been analyzed during project preparation. Analysis reveals that the project’s goal ofpromoting sustainable development ofthe tourism industry will have a positive effect towards the protection of Guizhou’s cultural and natural heritage and towards poverty alleviation. Adverse impacts will be avoided or mitigated by implementing the EMP. The proposed project is thus recommended.

13. Impact Assessment and Mitigation. The proposed project aims to facilitate the sustainable development of Guizhou’s cultural and natural heritage, and therefore can be predicted to deliver the benefits of improved preservation and conservation ofthe local heritage. The project will instill a commitment to, and practical experience of, sustainable approaches to tourism development amongst the government ofGuizhou and the public, resulting in enhanced cultural heritage appreciation, environmental stability, and economic development of isolated populations. Given the national significance of Guizhou’s heritage, the project also has the potential to make a substantive contribution to the development of similar approaches across China generally.

14. The project can also be predicted to deliver environmental and social benefits. If the investments at each site are carried out responsibly, they will contribute to the improvement oflocal environmental conditions. Social and economic benefits can be realized by increasing the numbers oftourists which will accelerate the development of service industries. Economic development driven by tourism will increase job opportunities and enhance incentives for the protection of cultural and natural heritage.

15. Construction Phase. The project components will potentially cause a variety of short-term impacts, such as dust, noise, and soil erosion. However, those impacts are relatively minor and a series ofmitigation measures have been planned to reduce the impacts to acceptable levels. Details ofmitigation measures, monitoring programs, and responsibilities are provided in the EMP. The Guizhou Provincial Project Management Office (PPMO) will have an ongoing responsibility to track and report the monitoring work of all Project Implementation Units (PIUs), in addition to its own direct monitoring activities, as well as the progress and status of EMP implementation.

16. Details ofmitigation measures, locations, time frames, and the agencies responsible for implementation and supervision are provided in the EMP. The EMP covers such areas as water management, air quality control, noise management, construction site waste, removal ofsoil by layer and separate stockpiling, covering piles

99 to limit wind erosion, construction of runoff channels and water storage, and correct orientation of roads and paths.

17. Operation Phase. Some potential environmental impacts/issues, which may appear in the long term, have been identified, such as solid waste collection and disposal and noise management. However, many ofthe concerns have been addressed in the course of the design of the facilities. Local capacity of environmental management will be strengthened through the technical assistance component supported by the Bank loan.

18. Public Consultations and Information Disclosure. Two rounds of public consultation were conducted at the preparation of the EA terms of reference from April to May, 2007, and at the completion of the draft EA report from November to December, 2007, by using questionnaires, expert consultation, household interviews, and public hearings. Participants were mainly individuals who would be affected by environmental impacts, as well as organizations, institutes, nongovernmental organizations, and experts. The detailed information on the public consultations is available in the Project File.

19. Information on the project and potential environmental impacts has been publicly disclosed through various means, including online (www.ghidri.com.cn) and in local newspapers (Guizhou Daily, January 30,2008).

20. Environment Management Plan. The EMP has been developed in a separate and stand-alone document for the project. The EMP includes policy basis and applicable environmental standards, environmental management systems, mitigation measures, monitoring plans, institutional arrangements, capacity building and estimated costs for the mitigation measures and monitoring programs during construction and operation. To ensure that national, provincial, and municipal environmental laws, regulations and standards - as well as World Bank environmental requirements - are respected during project preparation and implementation, environmental specialists will be directed to monitor and supervise the project. The Bank loan will be provided to hire the environmental specialists and to implement the EMP.

2 1. The EMP includes environmental monitoring programs for both construction and operation phases. The parameters to be monitored include noise, dust, water quality, and solid waste disposal. To ensure the strict and efficient implementation of the mitigation measures (including environmental obligations during construction), a program of monitoring activities will be required. This includes two types of monitoring (further details are found in the EMP): (a) environmental supervision, i.e. the general environmental monitoring of construction sites and activities; and (b) compliance monitoring, i.e. the specific monitoring of water quality, air quality, and noise levels. The progress report furnished by the PPMO will include environmental monitoring reports, as per the formats in the EMP. An annual summary report on EMP implementation progress will be provided to the Bank to report the activities conducted in the previous calendar year.

100 Physical Cultural Resources

22. According to the World Bank’s OP/BP 4.1 1, the analysis of physical cultural resources and their protection measures has been conducted as part of EA. In the EA report, a chapter - Chapter 7 - has been added to present relevant information. The project components cover a broad spectrum of attractions from cultural and natural heritage assets to stunning geological formations.

23. The legal framework for the protection and management of cultural resources in China is strong. The Cultural Heritage Protection Law of the People’s Republic of China (1982), the Law of Cultural Relic Protection (2002), and associated regulations provide the legal basis in China for protection of cultural relics.

24. The Law of Cultural Relic Protection stipulates that construction and tourism development should comply with the policy of cultural relic protection. This means that these activities are prohibited from causing any damage to cultural relics. Within the ‘construction control zone’ or the ‘cultural relic protection unit,’ it is prohibited to build facilities that cause pollution-related damage to cultural relics and their environments. Any activity which may affect the safety and environment of cultural relics is prohibited. Construction projects within the construction control zone that threaten the historical view and style are prohibited. This law also stipulates that existing facilities which have caused pollution damage to the cultural relic and its environment should be treated to end the problem.

25. The Principles for Conservation of Heritage Site in China - the China Principles - - were developed through a joint effort of China’s International Council on Monuments and Sites and the State Administration of Cultural Heritage in 2000. The China Principles are professional guidelines for conservation practices within the existing legislative framework.

26. Presently, there are no specific laws concerning tourism development in China, although the need for such laws has become evident due to the rapid development of China’s tourism industry over the last decade. A series of technical standards have been developed recently to provide technical guidance on tourism planning and facility development. Two in particular have been approved. These are: Measures for the Administration of Tour Guide Assessment and Appraisal; and the Chinese National Tourism Administration’s Amendment to the Implementation Measures for Tour Guide Administration.

27. Designs and bidding documents for conservation works will be prepared by qualified institutes under the direction of the PPMO. Furthermore, the appropriate culture bureau must approve the designs. This is a prerequisite for the implementation of conservation works, as per Chinese law. The contractors must provide the certification, which will be assessed during pre-qualification. In addition, all contracts under the project will include provisions for chance-find procedures.

101 Social Safeguards

28. Bank Guidelines. The Bank’s OP 4.10 states that in cases where “Indigenous Peoples are the sole or the overwhelming majority of direct project beneficiaries, the elements of an Indigenous Peoples Plan (IPP) should be included in the overall project design.” A summary of how the elements of the IPP have been integrated in the overall project design and how the project complies with the relevant policies is provided below. The details are also found in the “Social Assessment: Indigenous Peoples”.

Social Assessment

29. Indigenous Peoples. Guizhou is renowned for the diversity of its ethnic minority groups. The proposed Guizhou Cultural & Natural Heritage Protection and Development Project involves 17 villages, four ancient towns, four scenic sites, and four gateway towns, spread across 17 counties in four prefectures/municipalities. Among the 17 counties, 13 are national poverty counties and autonomous ethnic minority counties. The total beneficiary population of the project is 61,767. Ofthese beneficiaries, about 38,879 (or 63%) are ethnic minorities. Ofthese, 35,924 (or over 90%) belong to the Miao, Dong, and Buyi minorities. The ethnic minority population in the project areas can be further broken down as follows: 13,452 Miao (34.6%), 15,746 Dong (40.5%), 6,726 Buyi (17.3%), with the remaining 2,955 or so (7.6%) belonging to other ethnic groups.

30. The Guizhou Provincial Center for Tourism Research and Public Outreach conducted two field surveys in the four project municipality/prefectures from May 2007 to February 2008. The team collected baseline information on the demographic, social, cultural, and political characteristics of the affected indigenous peoples’ communities including the land and territories that they have traditionally owned or customarily used or occupied, and the natural resources on which they depend. Survey methods included interviews, public forums, and questionnaires. The surveys targeted residents in the proposed project county towns and villages, as well as business owners, local government agencies, and other companies. The survey team carried out free, prior, and informed consultations with the indigenous stakeholders (especially women and poor indigenous peoples) in the communities by way of questionnaires (242 in total), interviews, workshops (47 in total) and observations, to identify their needs for the project and analyze the impacts of the project. The team subsequently confirmed extensive support from the indigenous peoples’ communities.

3 1. The findings ofthe surveys and analysis have been prepared in accordance with OP 4.10 and included in the Social Assessment report. It has been concluded that minorities’ needs are appropriately integrated into the project design. The report has also concluded that the proposed project will have an overwhelmingly positive impact on the indigenous peoples’ communities, providing them with non-agricultural job opportunities in the short-term, promoting tourism and urbanization in the long term, and encouraging them to follow environmental protection measures. The Operation Manual for Community Participation (OMCP), which includes procedures for project implementation and management, has been also prepared and endorsed by the PPMO.

102 This manual will be distributed to the indigenous peoples’ communities to help them participate in the project, manage their components, and receive direct benefits.

32. In terms ofbenefits to the indigenous people, the project will mostly affect areas with high percentages oftheir communities. In most instances, these communities make up more than 50% ofthe beneficiaries. Furthermore, most ofthe project areas are autonomously run by the indigenous peoples. There are a range ofpolicies, regulations, and decision-making processes, from the state to the local level, to ensure the affected indigenous peoples are free to maintain or reform their own cultural customs and practices. These indigenous peoples are also free to arrange and manage local economic construction activities, as well as manage and conserve local natural resources. The autonomous government organizations also ensure that all affected indigenous peoples enjoy equal rights. All project activities to be carried out in the indigenous peoples’ areas must conform to these policies and regulations. In the project areas where the indigenous peoples are not a majority ofthe beneficiaries, the above policies and regulations still apply. Their equal rights in politics, economy, culture, and natural resources are assured so that they may benefit equally from the project.

33. Potential negative impacts on lands and natural resources in indigenous peoples’ areas include engineering land requisition and relocation, and change in their land use. However, since the jurisdiction ofthe village protection project lies with the village committee and the village tourism association, the collectively-owned land may only be used by the project after fully consulting with villagers. Only the Longli Ancient Town Heritage Protection subcomponent may involve housing demolition. Consequently, the Resettlement Action Plan (RAP) has been prepared for the affected indigenous peoples to guarantee housing restoration, and to reduce any negative cultural, economic, and social impacts arising from resettlement. Furthermore, the Resettlement Policy Framework includes procedures and processes for adjustment of collective land use.

34. It has been concluded that marketing the indigenous peoples’ cultural resources will not conflict with their customs, religious beliefs, or culture.

35. Policy and regulations. Guizhou Province has enacted its ordinance of autonomous prefectures in accordance with the Constitution, which stipulates how to enforce the Law on Regional National Autonomy. Each prefecture’s indigenous autonomous counties have also formulated their ordinances that give specific stipulations on national economic goals - pursuant to the state and provincial laws and policies, which protect traditional cultures and natural resources ofindigenous peoples, as well as guarantee their equal political, economic, and cultural rights. The project locations and components have been selected in compliance with the above policies and regulations, and they reflect the consensus ofthe communities ofthe Miao, Dong, Buyi, and other ethnicities.

103 Minorities Affected by Component

36. Component 1: Ethnic Minority Cultural Heritage Protection. The component involves a total of 17 villages and four ancient towns in Guizhou Province. As showed in the table below, among these counties, 11 are national poverty counties and autonomous ethnic minority counties. The total beneficiary population is 52,440, of which 33,372 (63.6%) belong to ethnic minorities. Ofthese, over 90% belong to either the Miao, Dong, or Buyi minority. The percentage of the Miao, Dong, and Buyi is 34.6%, 40.5% and 18.8% respectively ofthe ethnic minority beneficiary population in the project areas.

Table: Indigenous Peoples in Component 1

8 Balla River Huaienbao Miao Kaili City no no 350 280 80% Cultural Heritage Protection 9 Balla River Nanhua Miao Cultural Kaili City no no 812 8 12 100% Heritage Protection 10 Balla River Lmgde Leishan Upper Miao Cultural Yes Yes 757 757 100% County Heritage Protection 11 Balla River Xiijiang Leishan Mia0 Cultural Yes Yes 5280 5254 99.5% County Heritage Protection 12 Zhaoxing Dong Liping Cultural County Yes Yes 3610 3610 100% Heritag Protection

104 Percent of National Ethnic Total Ethnic Beneficiary NO. Project Description CityiCounty Poverty Minority Beneficiary Minority Ethnic County County Population Population Minority

1 Jiuzhou Ancient Huangping Town Heritage Yes Yes 4800 2688 56% County Protection 2 Longli Ancient Jinping Town Heritage Yes Yes 3873 775 20% County Protection 3 Tianlong Tunpu Pingba Cultural Heritage no no 6500 0 0 County Protection 4 Jiuzhou Tunpu Cultural Heritage Xixiu District no no 91 14 3472 38.1% Protection

37. Component 2: Natural Heritage and Scenic Site Protection and Development. This project includes four Scenic Sites: (a) Guanling National Geo-Park in Anshun Municipality; (b) Dingxiao National Geo-Park in Qianxinan Prefecture; (c) Wanfenglin National Scenic Park in Qianxinan Prefecture; and (d) Shanmu River Scenic Park in Qiandongnan Prefecture. As showed in the table below, the total beneficiary population is 9,076, of which 5,507 (or 61%) are ethnic minorities (Le. Buyi ethnicity).

Table: Indigenous Peoples in Component 2 Percent of National Ethnic Total Ethnic Beneficiary NO. Project Description City/County Poverty Minority Beneficiary Minority Ethnic County County Population Population Minority Population

Cultural and Shibing Notes: this is the number Natural Heritage County 85 ofemployees in the scenic Protection yes I yes site, as no villages are 2 Guanling National Guanling involved. Geo-Park Heritage 62 county Protection I

105 Percent of National Ethnic Total Ethnic Beneficiary NO. Project Description CityKounty Poverty Minority Beneficiary Minority Ethnic County County Population Population Minority Population 3 Wanfenglin National Scenic Park Cultural and Xingyi no no 4498 2433 Natural Heritage City 55% Protection (Lower Nahui Village) 4 Dingxiao Geo-Park Dingxiao no no 4431 3074 70% Heritage Protection County I I I

3 8. Component 3: Tourism Gateway Town Facilities Development. The component has four Tourist Information Centers located in Jianhe County, Liping County, Leishen County and Guiyang. The Guizhou Cultural and Natural Heritage Protection and Development Center will be established at the Guiyang Normal University, Guiyang. As showed in the table below, Jianhe and Liping are both national poverty counties and minority counties (with mainly the Miao and Dong ethnicities). The direct beneficiaries are 176 employees.

Table: Indigenous Peoples in Component 3

m., Ethnic Minority National. -.. - ..-. I Ethnic ' NO. I ProjectDescription I CityICounty I Poverty I h.linority I BI Minority Population 1 1 Jianhe Tourist ves ves 25

Heritage Protection Guiyang no no 68 and Development Center

Social Impacts Identified and Integration of IPP Elements in Project Design

39. While minority communities benefit from the project in different ways as indicated in the Social Assessment report, some potential risks and adverse impacts were identified as well. The following table summarizes how these risks and impacts have been addressed in the overall project design:

106 Table: Integration of IPP Elements in Project Design Risks and Impacts Measures Taken in Project Design Identified Lack of community In the earlier stage ofproject preparation, it was discovered that ethnic participation and villager minorities lacked adequate participation and involvement in the project. participation Subsequently, fiee, prior and informed consultation has been carried out during social assessment, so that villages/communities have a better understanding of the project. Meanwhile, the OMCP has been prepared to ensure villagers (especially ethnic minorities) will participate. Inadequate After consultation with the communities, the following actions will be understanding on the conducted: (a) ensuring sufficient participation and training for identification, issue ofcultural heritage prioritization, interpretation, and protection ofculture, through community- protection based participation; (b) mobilizing communities to help prepare a list of cultural heritage in their own village, so they can better understand and recognize the value and significance oftheir cultural heritage, especially as a way to potentially mitigate poverty; (c) establishing the subjective position of natives in cultural heritage protection; (d) encouraging the young to inherit and engage in development oftraditional crafts and arts, and in turn participate in tourism; and (e) reducing possible risks of large-scale commercialization and market profiting. Lack ofprotection of Most villagers have ‘masters’ who possess skills and knowledge about ethnic handicrafts, folk intangible cultural heritage (embroidery, dyeing, silver works, tin works, arts, traditional skills, songs, dances, stories, etc.). The skills transfer could include: (a) use ofmasters and rituals to provide training to interested young people in the village; (b) organizing a series ofregular short-duration formal training programs for interested persons along with hands-on training; and (c) production ofbooks, brochures, and CDs ofthe various ethnic arts, crafts, songs, stories and oral histories, etc. This may involve creating space for an arts and crafts workshop with an attached outlet that could sell handicraft items, recordings of folk songs, brochures, etc. The project could support the fee payments to masters, and all costs ofboard, lodging, and logistics for trainees who commit to formal training. Prospective trainees would be screened to ensure that they have genuine interest in using the skills. Risk of Inappropriate tourism investments are likely to destroy cultural heritage. The overcommercialization Guizhou Provincial Government has developed guidelines and regulations to protect the minority villages and ensure that they reap the benefits from their own cultural heritage assets. It has been agreed that all proposed commercial activities would: (a) conform to the list ofapproved commercial activities; (b) require agreement with the Village Tourism Association; (c) conform to design and construction guidelines for minority villages; and (d) require construction permits from the Village Committee and the County Government, to denote their approval ofstructures. Potential risks associated In the design report, the traditional architecture and housing conservation and with the renovation of rehabilitation requirements are presented: (a) any changes must be based on old buildings traditional patterns and use traditional materials; (b) safety and aesthetics should be taken into consideration during renovation, such as electrical wiring, sanitation improvement, heating, water-proofing and wind-proofing. In addition, detailed selection criteria and procedures will be included in the OMCP.

107 Risks and Impacts Measures Taken in Project Design Identified Criteria of village hotel, The architectural guidelines and criteria are to be stipulated during project home-stay and Family implementation to promote consciousness ofethnic architectural protection, museum and to improve use and management. A looming threat is the loss oftraditional ethnic arts and crafts due to a trend ofrapid commercialization. The Community’s Guide for Business Planning, therefore, must encourage ways to regulate market behavior and adjust project implementation, to promote cultural heritage protection and prevent over-commercialization. Moreover, this guide will provide the villagers, especially craftsmen, with effective ways to protect their rights (such as patent rights), and allow them to actively participate in the protection oftheir own intellectual products. Lack of funding Generally, the grant program in the project will benefit villagers by capacity building. Such programs may provide a solution to the lack offinancial resources in many villages, and allow the villagers to develop ethnic crafts. Also, this type ofmeasure may encourage villager participation in the project. In doing so, they would share more ofthe economic benefits oflocal tourism, as well as earn a certain degree ofdecision-making power over the grant. Inadequacy ofvillagers’ Detailed participation and training plans have been prepared in the OMCP. capabilities These plans will be carried out to guarantee villager participation, monitoring, and capacity building, especially through institutional designs (such as the establishment ofproject implementation committees and project monitoring groups at the community level) and specific regulations (such as interest allocation). Financial burdens on It was agreed that the government will take full responsibility for loan communities repayment. All facilities will be owned by the community. To make the project results sustainable, the community will be responsible for the maintenance of facilities constructed within the community. The maintenance fund will be generated from users’ fees and tourism revenues. These arrangements can be found in the OMCP. Community members will be informed during implementation.

40. Land Acquisition and Livelihood Reformation. Potentially adverse impacts include land acquisition, change in land use (particularly affecting agricultural land), and noise and public safety concerns during construction. The Social Assessment on Indigenous Peoples discusses measures to mitigate such risks, and also discusses the range of state and local policies and regulations which guarantee the indigenous peoples’ equal rights under the law. The RAP provided detailed measures of livelihood reformation for minority people affected by land acquisition. The summary is presented in the following table.

4 1. Ofall the subcomponents, three involve acquisition of collectively-owned land. Moreover, the land acquired in two of these cases - Xingyi National Geo-Park Dingxiao Guizhou Dragon Heritage Protection, and Guanling National Geo-Park Heritage Protection subcomponents - is uninhabited barren hills. Since these areas are collectively-owned and affect no people, it is unnecessary to compile a RAP. The third case, the Longli Ancient Town Heritage Protection subcomponent in Jinping County, involves land acquisition and house demolition. Consequently, a culturally-sensitive RAP has been prepared for the affected indigenous peoples to guarantee their house restoration, and to reduce the negative cultural, economic, and social impacts arising from resettlement.

108 0 0

OiO Annex 11: Project Preparation and Supervision CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Planned Actual PCN review 04/23 /2 00 7 04/2 3/2007 Initial PID to PIC 06/27/2 0 07 Initial ISDS to PIC 06/28/2007 Appraisal 08/1 8/2008 09/0 8/2008 Negotiations 03/24/2008 03/18/2009 BoardRVP approval 05/26/2008 Planned date of effectiveness Planned date of mid-term review Planned closing date

Key institutions responsible for preparation of the project:

Guizhou Provincial Project Management Office Guizhou Provincial Tourism Bureau Guizhou Provincial Development and Reform Commission Guizhou Provincial Finance Bureau Guizhou Provincial Environmental Protection Bureau Guizhou Provincial Construction Bureau Guizhou Provincial Land and Resources Bureau Guizhou Provincial Economy and Trade Commission Guizhou Provincial Ethnic Affairs Commission Guizhou Provincial Water Resources Bureau Guizhou Provincial Cultural Bureau Guizhou Provincial Office of Poverty Alleviation

Bank staff and consultants who worked on the project included:

Name Title Unit Shenhua Wang Task Team Leader EASUR Mingyuan Fan Senior Sanitary Engineer EASCS Senior Environmental Chongwu Sun EASCS Specialist Chaogang Wang Senior Social Scientist EASCS Jim Xie Senior Economist EASRE Miki Endo Operations Officer EASUR Senior Financial Management Haixia Li EAPCO Specialist Xujun Liu Piocurement Specialist EAPCO Margaret Png Senior Counsel LEGES Junxue Chu Senior Finance Officer LOAFC Chandra Godavitarne Municipal Engineer Consultant Katrinka Ebbe Cultural Heritage Specialist Consultant 110 Kristoffer Hvidsteen Tourism Marketing Specialist Consultant Tourism Development Erik Holm Peterson Consultant Specialist Luisa Elena Mengoni Intangible Heritage Specialist Consultant Architecture and Tangible Pierre Daniel Coute Consultant Heritage Specialist Kunimasa Nishigaya Economist/Financial Analyst Consultant Landscape Architecture Tong Man Consultant Ahn Specialist Vellet Fernandes Program Assistant EASUR Xuemei Guo Program Assistant EACCF

111 Annex 12: Documents in the Project File CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

A. Government and Consultant Reports

1. Guiyang 11 th Social and Economic Development Five-Year Plan, January 2006 2. Guiyang City Master Plan 2003-2020 - Executive Summary Report 3. Circular on Establishing Leading Group for Guizhou Cultural and Natural Heritage Protection and Management Project 4. Report on Using World Bank Loan for Guizhou Cultural and Natural Heritage Protection and Development Project 5. Social Assessment 6. Consolidated Feasibility Study Reports 7. Consolidated Resettlement Action Plan 8. Environmental Impact Assessment 9. Environmental Management Plan 10. Operation Manual for Community Participation 11. Community-Based Rural Tourism Guidelines, prepared by the Guizhou Provincial Tourism Bureau and the Performance Excellence Limited ofNew Zealand, July 2006

B. Bank Staff Assessment

1. Mission Aide Memoires 2. Procurement Capacity Assessment Report 3. Financial Management System Assessment Report

112 Annex 13: Statement of Loans and Credits CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO86035 2007 CN-CF-Tianjin Landfill Gas Recovery 0.00 0.00 0.00 0.00 0.00 8.41 0.00 0.00 PO865 15 2007 CN-3rd National Railway 200.00 0.00 0.00 0.00 0.00 200.00 13.33 0.00 PO83322 2007 CN-SICHUAN URBAN DEV 180.00 0.00 0.00 0.00 0.00 170.70 19.20 0.00 PO873 18 2007 CN--GEF-Guangxi Integrated Forestry 0.00 0.00 0.00 5.25 0.00 4.65 0.13 0.00 Dev. PO81776 2007 CN-GUAh'GDONGPRD2 96.00 0.00 0.00 0.00 0.00 96.00 4.33 0.00 PO88964 2007 CN-Guangxi Integrated Forestry Dev 100.00 0.00 0.00 0.00 0.00 84.09 -14.25 0.00 PO90377 2007 CN-GEF-2nd Shandong Environment 0.00 0.00 0.00 5.00 0.00 4.50 0.00 0.00 PO96285 2007 CN-MSE Finance 100.00 0.00 0.00 0.00 0.00 100.00 8 1.33 0.00 PO75613 2007 CN-Shaanxi Ankang Road Development 300.00 0.00 0.00 0.00 0.00 300.00 10.57 0.00 PO953 15 2007 CN-W. Region Rural Water & Sanitation 25.00 0.00 0.00 0.00 0.00 25.00 0.00 0.00 PO77752 2007 CN-SHANDONG ENVMT 2 147.00 0.00 0.00 0.00 0.00 132.00 -10.83 0.00 PO92618 2007 CN-LIAONING MED CITIES INFRAS 2 173.00 0.00 0.00 0.00 0.00 173.00 0.00 0.00 PO91020 2007 CN-Fujian Highway Sector Investment 320.00 0.00 0.00 0.00 0.00 320.00 34.50 0.00 PO81255 2006 CN-ChangjianglPearl River Watershed 100.00 0.00 0.00 0.00 0.00 96.80 15.47 0.00 Reha PO82992 2006 CN-GEF-Termite Control Demonstration 0.00 0.00 0.00 14.36 0.00 14.36 1.03 0.00 PO81348 2006 CN-HENAN TOWNS WATER 150.00 0.00 0.00 0.00 0.00 149.63 19.63 0.00 PO82993 2006 CN-GEF-PCB Mgnt & Disposal 0.00 0.00 0.00 18.34 0.00 17.57 9.12 0.00 PO84742 2006 CN-IAlL I11 200.00 0.00 0.00 0.00 0.00 113.92 5.62 0.00 PO705 19 2006 CN-Fuzhou Nantai Island Peri-Urban Dev 100.00 0.00 0.00 0.00 0.00 99.75 21.00 0.00 PO85124 2006 CN-Ecnomic Reform Implementation 20.00 0.00 0.00 0.00 0.00 18.44 3.27 0.00 PO75732 2006 CN-SHANGHAI URBAN APL2 180.00 0.00 0.00 0.00 0.00 146.64 13.31 0.00 PO85333 2006 CN-5th Inland Waterways 100.00 0.00 0.00 0.00 0.00 68.70 22.53 0.00 PO99992 2006 CN-Liaoning Medium Cities 218.00 0.00 0.00 0.00 0.00 190.41 -7.18 0.00 Infrastructure PO96158 2006 CN-Renewable Energy I1 (CRESP 11) 86.33 0.00 0.00 0.00 0.00 72.67 28.06 0.00 PO94388 2006 CN-HFC-23 Emissions Reduction 0.00 0.00 0.00 0.00 0.00 1,042.93 0.00 0.00 PO93906 2006 CN3rd Jiangxi Hwy 200.00 0.00 0.00 0.00 0.00 169.89 -0.11 0.00 PO90336 2006 CN-GEF-NINGBO WATER & ENVMT 0.00 0.00 0.00 5.00 0.00 4.50 1.33 0.00 PO86629 2006 CN-Heilongjiang Dairy 100.00 0.00 0.00 0.00 0.00 94.64 14.48 0.00 PO86505 2005 CN-NMGBO WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 92.53 -2.97 0.00 PO75730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 155.62 50.79 0.00 PO81161 2005 CN-CHONGQING SMALL CITIES 180.00 0.00 0.00 0.00 0.00 154.70 42.97 0.00 PO7272 1 2005 CN-GEF-Heat Reform & Bldg Egy Eff, 0.00 0.00 0.00 18.00 0.00 14.95 7.66 0.00 PO67625 2005 CN-GEF-Renewable Energy Scale-up 0.00 0.00 0.00 40.22 0.00 37.67 -0.35 0.00 Program PO71094 2005 CN - Poor Rural Communities 100.00 0.00 0.00 0.00 0.00 75.45 42.95 0.00 Development PO81346 2005 CN-LIUZHOU ENVIRONMENT MGMT 100.00 0.00 0.00 0.00 0.00 66.38 1.23 0.00 PO67828 2005 CN-Renewable Energy Scale-up Program 87.00 0.00 0.00 0.00 10.00 5.41 10.91 0.00 PO87291 2005 CN-CF-Jincheng Coal Bed Methane 0.00 0.00 0.00 0.00 0.00 18.13 0.00 0.00 Project

113 PO69862 2005 CN - Agricultural Technology Transfer 100.00 0.00 0.00 0.00 0.00 76.17 31.27 0.00 PO57933 2005 CN-TAI BASIN URBAN ENVMT 61.00 0.00 0.00 0.00 0.00 34.18 19.36 0.00 PO68752 2005 CN-Inner Mongolia Highway & Trade 100.00 0.00 0.00 0.00 0.00 45.76 -8,82 0.00 Corrid PO81749 2004 CN-Hubei Shiman Highway 200.00 0.00 0.00 0.00 1.oo 9.19 -13.14 0.00 PO84003 2004 CN-GEF GUANGDONG PRD URB 0.00 0.00 0.00 10.00 0.00 9.58 6.04 0.00 ENV PO77615 2004 CN-GEF-Gansu & Xinjiang Pastoral 0.00 0.00 0.00 10.50 0.00 5.29 8.44 0.00 Develop PO77 137 2004 CN-4th Inland Waterways 91.00 0.00 0.00 0.00 0.46 52.06 25.69 25.19 PO65035 2004 CN-Gansu & Xinjiang Pastoral 66.27 0.00 0.00 0.00 0.00 23.75 12.19 0.00 Development PO75728 2004 CN-GUANGDONGPRDUR ENVMT 128.00 0.00 0.00 0.00 0.64 74.54 19.92 0.00 PO75602 2004 CN-2nd National Railways (Zhe-Gan 200.00 0.00 0.00 0.00 1.oo 0.25 -22.08 -23.08 Line) PO75035 2004 CN - GEF-Hai Basin Integr. Wat. 0.00 0.00 0.00 17.00 0.00 10.33 11.13 0.00 Env.Man. PO73002 2004 CN-Basic Education in Western Areas 100.00 0.00 0.00 0.00 0.00 35.52 32.70 0.00 PO65463 2004 CN-Jiangxi IntegratedAgric. Modern. 100.00 0.00 0.00 0.00 0.00 61.14 35.40 0.00 PO66955 2004 CN-ZHEJIANG URBAN ENVMT 133.00 0.00 0.00 0.00 0.00 90.34 39.55 0.00 PO69852 2004 CN-Wuhan Urban Transport 200.00 0.00 0.00 0.00 1.oo 70.83 68.53 0.00 PO67337 2003 CN-2nd GEF Energy Conservation 0.00 0.00 0.00 26.00 0.00 7.17 25.84 0.00 PO40599 2003 CN-TIANJIN URB DEV I1 150.00 0.00 0.00 0.00 0.00 126.17 76.92 1.58 PO68058 2003 CN-Yixing Pumped Storage Project 145.00 0.00 0.00 0.00 0.00 47.17 34.93 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT APLl 200.00 0.00 0.00 0.00 0.00 88.67 52.85 0.00 PO70441 2003 CN-Hubei Xiaogan Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 19.25 19.25 0.00 PO58847 2003 CN-3rd Xinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 12.25 11.58 0.00 PO767 14 2003 CN-2nd Anhui Hwy 250.00 0.00 0.00 0.00 0.00 42.71 13.55 0.00 PO60029 2002 CN-GEF-Sustain.Forestry Dev 0.00 0.00 0.00 16.00 0.00 4.59 14.45 0.00 PO58846 2002 CN-Natl Railway Project 160.00 0.00 0.00 0.00 5.00 1.56 6.56 0.00 PO64729 2002 CN-Sustainable Forestry Development 93.90 0.00 0.00 0.00 0.00 20.14 13.25 0.00 PO68049 2002 CN-Hubei Hydropower Dev in Poor Areas 105.00 0.00 0.00 0.00 0.00 14.39 7.85 0.00 PO70459 2002 CN-Inner Mongolia Hwy Project 100.00 0.00 0.00 0.00 0.00 7.84 1.84 0.00 PO71147 2002 CN-Tuberculosis Control Project 104.00 0.00 0.00 0.00 0.00 41.63 27.33 0.00 PO45915 2001 CN-Urumqi Urban Transport 100.00 0.00 0.00 0.00 0.00 23.16 23.16 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION 105.50 0.00 0.00 0.00 0.00 15.25 15.25 0.47 CONTROL PO5 1859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 14.47 14.01 0.00 PO56199 2001 CN-3rd Inland Waterways 100.00 0.00 0.00 0.00 0.00 4.56 3.31 0.00 PO56596 2001 CN-Shijiazhuang Urban Transport 100.00 0.00 0.00 0.00 0.00 38.31 38.31 0.00 PO42 109 2000 CN-BEIJING ENVIRONMENT I1 349.00 0.00 0.00 25.00 26.51 156.56 183.07 10.76 PO45910 2000 CN-HEBEI URBAN ENVIRONMENT 150.00 0.00 0.00 0.00 0.00 27.83 27.83 5.38 PO64730 2000 CN-Yangtze Dike Strengthening 210.00 0.00 0.00 0.00 0.00 64.21 64.21 40.54 PO64924 2000 CN-GEF-BEIJMG ENVMT I1 0.00 0.00 0.00 25.00 0.00 18.95 25.00 10.48 PO49436 2000 CN-CHONGQING URBAN ENVMT 200.00 0.00 0.00 0.00 29.50 53.32 82.82 -1.37 PO56424 2000 CN-Tongbai Pumped Storage 320.00 0.00 0.00 0.00 100.00 27.76 132.96 6.68 PO51856 1999 CN-Accounting Reform & Development 27.40 5.60 0.00 0.00 0.00 6.25 6.03 5.25 PO38121 1999 CN-GEF-Renewable Energy 0.00 0.00 0.00 35.00 0.00 4.27 34.77 28.90 Development PO42299 1999 CN-Tec Coop Credit IV 10.00 35.00 0.00 0.00 5.84 10.87 14.18 0.00 PO36953 1999 CN-Health IX 10.00 50.00 0.00 0.00 0.40 9.59 7.85 7.85

114 PO36414 1998 CN-GUANGXI URBAN ENVMT 72.00 20.00 0.00 0.00 13.48 10.96 23.80 3.80 PO03614 1998 CN-Guangzhou City Transport 200.00 0.00 0.00 0.00 20.00 41.85 61.85 41.85 PO03539 1998 CN-Sustainable Coastal Resources Dev. 100.00 0.00 0.00 0.00 2.06 8.63 10.69 8.63 Total: 9,205.40 110.60 0.00 270.67 216.89 6,109.31 1,780.54 172.91

CHINA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 2006 ASIMCO 0.00 0.00 4.12 0.00 0.00 0.00 3.61 0.00 2005 BCCB 0.00 59.21 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 12.04 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.14 0.00 0.00 0.00 8.14 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 Babei Necktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 2005 BioChina 0.00 3.70 0.00 0.00 0.00 3.13 0.00 0.00 2002 CDH China Fund 0.00 2.02 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 17.99 0.00 0.00 0.00 11.38 0.00 0.00 2006 CDH Venture 0.00 20.00 0.00 0.00 0.00 0.51 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 10.53 0.00 0.00 0.00 0.00 0.00 0.00 2006 Capital Today 0.00 25.00 0.00 0.00 0.00 0.32 0.00 0.00 2005 Changyu Group 0.00 18.07 0.00 0.00 0.00 18.07 0.00 0.00 1998 Chengdu Huwong 3.36 3.20 0.00 3.13 3.36 3.20 0.00 3.13 2004 China Green Ener 20.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 2004 China Re Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 10.00 0.00 2004 Colony China 0.00 15.31 0.00 0.00 0.00 9.29 0.00 0.00 2004 Colony China GP 0.00 0.84 0.00 0.00 0.00 0.49 0.00 0.00 2006 Conch 81.50 40.93 0.00 0.00 81.50 0.00 0.00 0.00 2006 Dagang Newspring 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Darong 10.00 0.24 0.00 8.00 6.67 0.24 0.00 5.33 2006 Deqingyuan 0.00 2.85 0.00 0.00 0.00 2.85 0.00 0.00 1994 Dynamic Fund 0.00 2.21 0.00 0.00 0.00 2.01 0.00 0.00 2007 Epure 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Fenglin 17.64 0.00 6.00 13.47 13.64 0.00 6.00 12.53 2006 Fenglin HJ MDF 0.23 0.00 0.00 3.27 0.00 0.00 0.00 0.00

115 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.85 0.00 0.00 0.00 50.85 0.00 0.00 0.00 2003 Great Infotech 0.00 1.73 0.00 0.00 0.00 1.03 0.00 0.00 2006 Hangzhou RCB 0.00 10.85 0.00 0.00 0.00 0.00 0.00 0.00 2005 HiSofl Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2006 HiSoft Tech 0.00 4.34 0.00 0.00, 0.00 1.74 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 Jiangxi Chenming 40.00 12.90 0.00 18.76 40.00 12.90 0.00 18.76 2006 Launch Tech 0.00 8.35 0.00 0.00 0.00 8.33 0.00 0.00 2001 Maanshan Carbon 5.25 2.00 0.00 0.00 5.25 2.00 0.00 0.00 2005 Maanshan Carbon 11.00 1.oo 0.00 0.00 5.00 1.oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2006 Minsheng & IB 25.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 Minsheng Bank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 1996 Nanjing Kumho 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 Nanjing Kumho 31.38 2.23 0.00 0.00 31.38 2.23 0.00 0.00 2006 Neophotonics 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2001 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 1995 Newbridge Inv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00 2005 North Andre 8.00 6.74 0.00 0.00 0.00 4.25 0.00 0.00 2003 PSAM 0.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 RAK China 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 Renaissance Sec 0.00 0.00 20.04 0.00 0.00 0.00 0.00 0.00 2006 Rongde 0.00 35.00 0.00 0.00 0.00 31.38 0.00 0.00 SAC HK Holding 0.00 1.60 0.00 0.00 0.00 1.oo 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2006 SBCVC 0.00 20.00 0.00 0.00 0.00 2.00 0.00 0.00 2000 SEAF SSIF 0.00 3.74 0.00 0.00 0.00 3.37 0.00 0.00 SH Keji IT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 SHCT 38.18 0.00 0.00 28.64 29.04 0.00 0.00 21.78 2004 SIBFI 0.14 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 Shanghai Krupp 19.25 0.00 0.00 36.75 19.25 0.00 0.00 36.75 2006 Shanshui Group 50.00 5.50 2.20 0.00 50.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 SinoSpring 0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 Stora Enso 20.83 0.00 0.00 4.17 11.00 0.00 0.00 0.00 2005 Stora Enso 29.17 0.00 0.00 20.83 0.00 0.00 0.00 0.00 2006 Stora Enso 50.00 0.00 0.00 175.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1.00 0.00 0.00 0.00 1.00 0.00 0.00 Wanjie High-Tech 9.89 0.00 0.00 0.00 9.89 0.00 0.00 0.00 2004 Wumart 0.00 1.62 0.00 0.00 0.00 1.62 0.00 0.00 2003 XACB 0.00 17.95 0.00 0.00 0.00 0.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2006 Zhejiang Glass 50.00 24.96 0.00 18.00 0.00 0.00 0.00 0.00 2003 Zhengye-ADC 10.43 0.00 0.00 4.87 10.43 0.00 0.00 4.87

116 2002 Zhong Chen 0.00 4.78 0.00 0.00 0.00 4.78 0.00 0.00 2006 Zhongda-Yanjin 21.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 733.58 577.30 181.40 340.89 470.95 371.06 29.61 108.03

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2007 Xinao CTC 0.04 0.01 0.00 0.14 2004 China Green 0.00 0.00 0.01 0.00 2006 Launch Tech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 Total pending commitment: 0.05 0.03 0.03 0.14

117 Annex 14: Country at a Glance CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

East Lower- POVERTY and SOCIAL Asia mlddle- h Development diamond. China Pacific Income 2006 Population. mid-year (miliions) 13n8 1900 2,276 Life expectancy i GNI per capita (Atlas method, US$) 2,000 1863 2,037 GNI (Atlas method, US$ billions) 2,623.6 3,539 4,635 Average annual growth, 2000-06

Population (4 0.6 0.9 0.9 GNI Gross ~ Laborforce (%) 10 13 14 per primary Most recent estimate (latest year available, 2000-06) capita enrollment , I Poverty (% of population below nationaipo vertyiinej Urban population (%of totel population) 41 42 47 Life expectancyat birth (pars) 72 71 71 Infant mortality(per 1OOOiive births) 23 26 31 Child malnutrition (%ofchildren under4 8 15 t3 ACC~SSto improvedwatersource Access to en improvedwatersource (%ofpopulation) 77 79 81 Literacy (%ofpopulationage d+j 91 91 69 Gross pnmaryenrollment (%of school-age population) m M m --China M ale m 115 M -Lover-middle-income group I Female nz m M . KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986 1998 2006 2006 Economic ratlos' I GDP (US$ billions) 295.7 856.1 2.243.9 2,644.7 Gross capital formation!GDP 38.6 40.4 43.9 44.6 Trade Eqorts of goods and services/GDP 116 20.1 37.3 40.1 Gross domestic savings/GDP 35.8 42.5 49.4 52.5 Gross national SavingslGDP 35.9 413 510 54.1 Current account balancelGDP -2.8 0.8 72 9.4 Domestic Interest payments/GDP 0.2 0.5 0.1 savings formation Total debt/GDP 8.0 15.0 Q.6 Total debt service/exports 8.2 8.7 3.0 Present value of debt/GDP Q.3 Present value ofdebt/exports 30.6 I Indebtedness 1986-96 1998-06 2005 2006 2006-10 (average ennualgmwlhj GDP 0.1 9.0 0.4 0.7 0.6 -China GDP percapita 8.6 8.2 9.7 0.1 9.9 -. Lowr-middle-income group Exports of goods and services 0.0 218 24.3 23.3 U.4

STRUCTURE of the ECONOMY

118 China

PRICES and GOVERNMENT FINANCE 1986 1936 2001 2006 lnflatlon (Oh) Domestic prices I (%change) Consumer prices 8.3 18 15 Implicit GDP deflator 4.6 6.4 4.2 3.6 Government finance (%of GDP, includes current grants) Current revenue 0.0 a.5 7.2 6.4 Current budget balance -77.7 0.2 2.4 3.0 -GDPdeflator -CPI Overall SUrDIUS/defiCit -24.8 -14 -13 -0.7

TRADE 1986 2001 2006 1996 Export and Import levels (US$ mlll.) (US$ millions) Totalexports (fob) 30,942 151048 761999 969,073 1250 000 T Food 4,448 Q,231 22,481 25,722 Mineral fuels, lubricants, and related materiait 3,683 5,931 l7,621 7,776 11000.000 4 ,I Manufactures 8,670 P9,93 7P.960 98.147 750,000 Totalimports (cif) 42,904 138.833 660,118 7916'4 500.000 Food 1625 5,672 9,368 9,997 Fuel and energy 504 6,877 63,957 89.002 250 000 Capital goods 6.781 54,763 290,626 357,Q7 0 00 01 02 03 04 05 MI Export price index (20OO=?JOj 59 a2 n4 07 I import price index (200O=x)O) 76 08 m P4 n Exports Imports Terms of trade (20OO=WO) 77 it3 88 87 1

BALANCE of PAYMENTS 1986 1996 ZOOS 2008 Current account balance to GDP (K) (US$ millions) E~portsof goods end services 34,952 71678 836.888 1061681 4" - Imports of goods and services 43,453 154,P7 712,090 852,769 Resource balance -8,501 7,551 94,798 208,gP Net income -23 -P,437 1),635 11755 Net current transfers 378 2,P9 25,385 29,200 Current account balance -8.146 7,243 60,818 249,867 Financing items (net) 6.48 24,462 46,88 -2,842 Changes in net resews 1727 -31705 -207,OB -247,025 1 00 01 02 03 04 05 LXI I Memo: Reserves including gold (US% millions) 111,7l7 831427 1046,465 Conversion rate (DEC,iocaVUS$) 3.5 8.3 8.2 8.0

EXTERNAL DEET and RESOURCE FLOWS 138s I996 2001 2006 Composltlon of 2001 debt (US$ mlll.) (US$ millions) Total debt outstanding and disbursed 23,78 728.87 28168 IBRD 965 768 11140 11415 A: 11,140 IDA 774 7,579 9,741 9,997 B: 9,741 I Total debt service 2,973 15,756 27,361 IBRD 66 640 1139 1443 IDA 8 73 296 36 Composition of net resource flows Official grants 155 245 332 Official creditors 185 4,401 844 Private creditors 3,693 6,454 5,144 i Foreign direct investment (net inflows) 1875 40.60 79.P7 Portfolio equity(net inflows) 0 0 20,346 World Bank program Commitments 1PO 1900 1,277 0 A. IBRD E- Eil&!ad Disbursements 607 2,097 1111 190 E-IDA D-Othwrmltll~aal F-Rlvate Principal repayments 0 364 1004 1144 C-IMF 0-Short.tsrm Net flows 607 1734 P7 27 I interest payments 75 549 430 68 Net transfers 532 1185 -303 -588 - Note:This tablewas producedfrom the Development Economics LDB database. 9/28/07 I

'Thediamonds showfourkeyindicators in thecountly(in bold) comparedwithits income-groupaverage.iidataaremissing,thediamondwili ~

119 Annex 15: Planning Framework, Implementation Principles and Procedures CHINA: Guizhou Cultural and Natural Heritage Protection and Development Project

A. Background

1. Most ofGuizhou’s ethnic minorities are indigenous, live in remote rural areas, and have a very low standard of living, which constitutes the key rationale for Bank involvement in the project. The major focus ofthe project is to provide as much ofthe project’s benefits as possible, directly to the participating minority communities. To ensure that this occurs, a community- based development (CBD) approach will be adopted, specifically for the Ethnic Minority Cultural Heritage Protection component.

B. Community-based Development Approach to Project Planning and Implementation

2. To provide the necessary support and decision-making power to the ethnic minority villages that are developing cultural tourism under the project, a CBD approach will be used. This approach has been applied successfully in many Bank-financed projects in other countries and has been tested in China with the approval and involvement ofthe central government.

3. Based on extensive deliberations between Bank experts, provincial experts, and village communities, including village elders, the community-based project planning and implementation arrangements and principles described below have been developed. Although there has been positive experience with this approach in China, there is limited understanding in implementing such a large CBD program. Therefore, the effectiveness and success ofthe approach will only be known during implementation. The project includes flexibility to monitor and evaluate these implementing methods, using a ‘learning by doing’ approach, and to make adjustments, as appropriate. Successful models ofimplementation will be evaluated and publicized in other communities.

4. Village-level Organizationsfor Community-based Development. The main village-level organization to be formed for project implementation is the Community Project Management Group (CPMG), consisting ofrepresentatives from the Village Committee and elected representative villagers. Prior to project implementation, villagers will be organized into secondary-level village organizations or village implementation groups (VIGs), such as Village Tourism Association, Construction Team, Arts and Crafts Association and Senior Citizens Association based on the needs ofeach village. These groups will undertake the activities funded by the project including those supporting intangible heritage and implementation ofcommunity- level infrastructure and building construction. The Village Supervision Group will supervise implementation ofvillage activities organized by the CPMG to ensure that the established process and procedures are followed.

5. Decision-making Process. The package ofinfrastructure works and other investments for heritage protection proposed for each village in the feasibility study report is based on consultations with the villagers during project preparation and technical input from specialists. The resulting cost estimates that were developed will be considered as the budget allocation for 120 each village. At the start of project implementation, the CPMG in each village will have the opportunity to decide on the exact package of investments they wish to undertake, based on the complexity and effectiveness of technology, ease of maintenance, and capital and operating costs.

6. Infrastructure Facilities in Villages and Towns. In consultation with the village organizations, the CPMG will make decisions and recommendations to the county-level Project Management Office (PMO) on: (a) the infrastructure package for each village; (b) works suitable for implementation by the VIGs; (c) the activities, training, and technical assistance package for intangible heritage protection, and income generation; (d) beneficiaries eligible for skills training, including business development; (e) beneficiaries eligible for financial support for conservation and rehabilitation of buildings; and (f) measures to raise revenues for operation and maintenance (O&M) of village assets.

7. The CPMG will make a decision on the package for infrastructure investments based on a complete knowledge and understanding of appropriate technology options and O&M costs, assisted by advice and guidance from community coordinators/facilitators and technical specialists. The final package for each village will be recommended to the county-level PMO for funding. The county-level PMO will award the works for infrastructure using procurement procedures, including National Competitive Bidding and shopping. Contracts awarded to communities through ‘shopping’ procedures will be based on quotations developed by the VIGs, assisted by technical specialists and community coordinators/facilitators provided by the project, and endorsed by the CPMG. All physical investments will be coordinated, and will comply with the village conservation plans and requirements to protect the traditional visual and historic environment of the villages and surrounding cultural landscapes.

8. Participatory Heritage Identijkation and Public Awareness Raising. Raising villagers’ awareness of the significance and value of their traditions, and their appropriate use as a vehicle for poverty alleviation, will be one of the first and most important project activities. A participatory process will be established by community coordinators/facilitators in conjunction with the CPMG to create discussions and develop an inventory of the natural and cultural (intangible and tangible) heritage resources for villages. The purpose of this inventory is to increase community interest, knowledge, appreciation, and validation of local customs, history and traditional skills and to form a common vision of their importance for the community. Public awareness will increase as a result of these discussions and awareness can be further enhanced through small community-defined exhibits and events.

9. Both the participatory heritage identification process and the awareness raising activities based on this information can serve to develop community commitment to stewardship of local cultural resources and project objectives. The increased appreciation of local culture can also foster a new sense of identity and pride, encourage young people to continue practicing traditional crafts and performance arts, and create new energy for other types of development activity.

10. Authentic Documentation and Interpretation of Heritage. Authentic documentation and interpretation is not only critical to heritage conservation, but is also the basis for long-term

121 visitor interest and appreciation for Guizhou’s cultural assets. It is crucial to involve local communities in the definition and explanation of their intangible heritage because they are the owners of this heritage, and they possess the relevant knowledge. The more inclusive the group (e.g. elderly, women, youth, and poor) that defines a village’s heritage, the more representative and richer the outcome will be. It is also important to integrate specialists (i.e. anthropologists) who have knowledge of local heritage and expertise in the documentation, interpretation, and presentation of minority cultures. A close connection with the Guizhou Cultural and Natural Heritage Protection and Development Center in Guiyang is part of the project design and collaborations with other expert organizations such as the University of Minority Cultures in Beijing and UNESCO will be sought (See Annex 4 for details of the Guizhou Cultural and Natural Heritage Protection and Development Center).

11. Tourism and Community Decision Making. The CBD approach will be used to facilitate a broad village discussion and to develop consensus on the level and type of cultural tourism that communities want to host. Considerations that require community consensus include: number of tourists per day; whether guest houses should be located within the village or only nearby; the extent of sharing of rituals and celebrations with outsiders; days that villages are closed for private celebrations; villagers’ expectations for tourist behavior; levels of acceptable change in the appearance of the village and its lifestyle; the content of interpretation ofthe villages sights, traditions and activities; the training in tourism-related activities that villagers feel they need (e.g. guide services, handicrafts, sales shops, teachers or facilitators for workshops, home-stay and restaurant management); the organization and management of new tourism activities; arrangements for sharing the benefits and costs oftourism; and grievance procedures.

12. Cultural Heritage and Income Generation. During the participatory identification of cultural heritage it will be important to assess how local communities currently perceive their traditional culture and the risks and constraints associated with its development for tourism. The CBD approach should be used to help communities identify the costs and benefits associated with revitalizing traditional crafts, dance, songs, and celebrations and prioritize these activities. Some considerations are markets and earning potential, community pride, the risk of commercialization, current local use and trade networks, and availability of expertdmaster teachers.

13. This analysis will be used to identify strategies and the potential for conservation and income generation. For example, some of the issues associated with crafts development include: (a) risks (high expenses, low return, limited market, difficulty in learning, lack of incentives, family pressure, etc.); (b) perceived market demands (local and tourism-based) and existing (if any) marketing strategies; (c) existing local trade networks; (d) reasons for learning or continuing to practice a craft (as a specialist activity or for home use); (e) modalities of learning (at home, in workshops, in other towns); (f) willingness to teach skills to local villagers, outsiders, and tourists; (g) choice of patterns, materials and techniques; (h) current use of traditional clothes, body ornaments and hair-styles, and willingness to maintain them; (i)level of participation at traditional events in the village (festivals, religious events, competitions); and (j) activities involved in traditional events (offerings, dance, music, sale and purchase of goods, etc.).

122 14. Village Cultural Centers and Exhibits. The CBD approach will be also used to identify potential benefits, costs, risks, and challenges related to establishing village cultural centers and permanent exhibits, and to clarify their objectives, functions, internal organization, staff needs, and costs. An important element to consider is how these facilities will benefit local communities (employment, training opportunities, heritage revitalization activities, constitution of dance/music groups, etc.), and whether these activities will be economically sustainable in the long term. This analysis will help design appropriate models (cultural centers, workshop demonstrations, community-based museums, temporary fairs, and special events) for heritage Conservation and interpretation.

15. In addition to the goal ofprotecting heritage, cultural centers, exhibits, and workshops in the villages should be viewed in the context oftourism product development. Tourists prefer to have personal experiences (i.e. touch, smell, feel, etc.), thus the development ofworkshops and other engaging activities, such as crafts and cooking demonstrations, along with good interpretation, would be popular with tourists. Investments and space requirements for exhibitions and workshop demonstrations should be driven by documented tourist demand and the villages’ carrying capacity. Some project villages have physical size and capacity constraints that will limit the absolute number oftourists.

16. Factors to be considered before undertaking any permanent exhibits or community-based museums include: (a) manpower for management and maintenance; (b) infrastructure and facilities; (c) quantity, quality and availability ofcrafts products and artifacts; (d) collection strategies (purchase from families, short-term loan, etc.); and (e) conservation issues (special conditions needed to protect objects).

17. Conservation Plans for Ethnic Minority Villages. All participating villages will be required to have approved conservation plans. Development ofminority village conservation plans includes: (a) community identification ofimportant physical and natural heritage that requires conservation; (b) development oflocally-enforceable heritage protection measures that will maintain land use patterns, cultural landscapes, traditional architectural integrity, and overall aesthetic consistency; (c) guidelines and acceptable limits of change for basic infrastructure installation; (d) guidelines for residential upgrades, new construction, and rehabilitation of traditional buildings, including improvement ofinterior facilities (e.g. sanitation); and (e) development ofvillage-level informational materials (displays, signs, guide programs, and other materials) to raise awareness ofcommunity members and to educate visitors on the meaning, value, and significance ofthe local heritage.

18. Rehabilitation and Improvement of Private Assets. The project will include a limited amount of funding to support individual families to improve traditional housing and pursue economic activities. Specifically, the activities include: (a) facade rehabilitation and structural strengthening ofhistoric public buildings; (b) facade rehabilitation and structural strengthening ofprivate buildings; (c) internal refurbishment ofprivate buildings to improve water and sanitation facilities, (d) upgrading ofhouses for use as home-stays; (e) creation ofin-home workspace for intangible heritage activities; and (f) support to start business ventures.

123 19. Criteria for the selection of beneficiaries have been developed and described in the Operation Manual for Community Participation (OMCP). Beneficiaries will be selected by the CPMG based on these criteria, following adequate consultation, and the decisions will be made public in the village. The county-level PMO will make disbursements for these activities based on the CPMG recommendations. Aggrieved persons will have an opportunity to seek a review of their case by the county-level PMO. Consultations done during project preparation indicate that by and large, villagers will abide by the decisions of representative village organizations.

20. Community Works and Labor. In an effort to maximize the benefits that will accrue to communities, the project includes a provision to award small works contracts to the VIGs. This would be done by awarding suitable simple community works and building construction contracts to these groups, through quotations, prepared with the assistance of project technical staff and community coordinators/facilitators. Efforts will also be made to employ labor from villages to work on project contracts.

2 1. Participatory Monitoring and Evaluation. For communities to be truly engaged in their own development and heritage conservation, they must have a solid understanding of the results of project activities. Participatory monitoring and evaluation will offer villagers a concrete means of assessing and learning from the project activities in ways that are directly responsive to their needs and goals. Through the CBD approach, the project will support village residents in: identifying outcomes to be measured; defining the indicators of success; collecting information; and designing any corrective actions needed to improve performance and outcomes. Participatory monitoring and evaluation will be geared toward: measuring the effectiveness of project activities; creating ownership and empowering residents; developing accountability and transparency; and building local capacity to analyze, reflect and take corrective action.

22. Implementation Guidelines and Manuals. The following manuals, prepared under the project, provide detailed advice, guidance and requirements for implementation ofthe project components: (a) OMCP; (b) Architecture and Building Design and Construction Guidelines Manual; (c) Electrical Wiring for Rural Housing Manual; (d) Procurement Manual; and (e) Financial Management Manual.

C. Activities Supporting Income Generation and Poverty Alleviation

23. The protection and development of natural and cultural (tangible and intangible) heritage in Guizhou’s ethnic minority villages aims to safeguard a unique resource that is at risk of disappearing due to the effects of globalization and emigration, and to revitalize local traditions to generate new forms ofproductivity and sources of income. The project will support the following initiatives for income generation and poverty alleviation.

24. Intensive Skills Transfer. Elder “village masters” and “village artisans” who possess knowledge of intangible cultural heritage (history, folklore, songs, dance, etc.), crafts (embroidery, dyeing, silver works, tin works, etc.), and traditional construction skills such as stone masonry and carpentry will be employed to provide intensive training to interested young people in the village. This would be done through: (a) providing a series of regular short-duration formal training programs with hands-on training in intangible cultural heritage; (b) delivering

124 training in stone masonry, carpentry, and electrical wiring, including a manual on simple electrical wiring for rural housing; (c) producing books, brochures, and CDs on the various ethnic arts, crafts, songs, stories and folklore; and (d) providing space for arts and crafts workshops with a sales counter for handicraft items, recordings offolk songs (CDs), and brochures. Prospective trainees will be screened to ensure that they have real interest in using the skills.

25, Involvement of Villagers in Construction Activities. The project provides for village residents to be involved in construction activities, through the award ofsimple small contracts to communities, based on simplified procedures ofprocurement, i.e., shopping, and utilization of labor ofthe village by contractors executing works.

26. Creation of Facilities. To pursue the activities described above, space will be created in the proposed cultural centers and tourist information centers, or through provision of additional facilities. The facilities will be provided with the necessary equipment and tools for hands-on training and possibly some space for trainees who wish to start their own businesses. These facilities will provide the opportunity for visitors to witness the production ofarts and crafts and some display space for exhibits and sales.

27. Craft and Performance Associations. The status ofproducers ofarts and crafts will be strengthened by helping communities to organize themselves into associations that are able to: (a) represent the interests ofthe communities; (b) negotiate prices and reduce exploitation; and (c) procure the raw materials at wholesale prices for their members. Such organizations would enable expansion ofproduction; organize production based on demand, and increase artisan incomes.

28. Information Dissemination on Products, Markets and Quality. The project will provide an expert(s) with good knowledge of China’s urban crafts markets and international demand, and the product variations and quality improvements that could increase sales. The intention is to provide only information to minority villages; not create new designs or change traditions. The information may be used by villagers to plan their activities.

29. Market Development Support. To reduce the exploitation by middlemen, and retain more income for the artisans, community coordinatodfacilitators and/or companies will be engaged to help in marketing through: improved product advertising; negotiations with wholesalers; linking domestic and foreign buyers; developing contacts with established organizations dedicated to poverty alleviation (e.g. Oxfam) and; local companies or university organizations (other than the Guizhou Normal University) actively engaged in minority community development activities.

30. Organization of Events/Festivals. To generate interest, encourage visitors to experience cultural heritage, and generate revenues for communities, the Guizhou Provincial Tourism Bureau will assist in organizing special events or festivals in minority villages.

125 D. The Planning Framework and Implementation Principles for Cultural Heritage Protection and Tourism Development: Laws and Guidelines

3 1. Existing Laws, Regulations, and Guidelines. All existing national and provincial laws and regulations will apply to activities supported by the project.

(a) Built Heritage. Planning for interventions in natural and cultural heritage sites is covered by: national and provincial cultural heritage protection laws and regulations; village conservation plans; and the World Bank safeguard policy on Physical Cultural Resources (OP/BP 4.1 1). In addition, communities will be encouraged to follow the principles laid out in the “Principles for the Conservation of Heritage Sites in China”, which is available on the China International Council on Monuments and Sites (ICOMOS) website (http://www.icomoschina.org.cn).

(b) Intangible Heritage. Interventions to protect and conserve intangible cultural heritage will comply with national and provincial laws and regulations for its protection and be based on the UNESCO Convention for the Safeguarding of the Intangible Cultural Heritage signed by China in 2004; the Recommendations to Strengthen the Protection of China’s Intangible Cultural Heritage issued by the State Council in 2005; and the Operational Manual for Inventory Making for the Identification and Protection of Intangible Heritage issued by the Ministry of Culture.

(c) Natural Heritage. Depending on their categorization, preservation activities for parks will conform to national and provincial laws and tourism master plans, in addition to conservation plans, for proposed activities. Formal approval at the appropriate level is necessary for national heritage sites.

(d) Tourism. Tourism development will comply with the national, provincial and county tourism laws, the Guizhou Tourism Development Master Plan (2001); and the Guizhou Rural Tourism Development Plan, which focuses on tourism development and poverty alleviation by: generating employment and contributing to local economic development in the poor national minority areas; and ensuring sustainable development through the responsible use oftourism resources in minority areas.

32. Planning Toolsfor Conservation. All bank supported activities will be developed using planning tools such as those described below.

(a) Village and Historic Town Conservation Plans. Each cultural heritage site must have a conservation and protection plan, and all project investments must be based on this plan. The plan must incorporate: (i)core protection areas where no new development can occur and only conservation ofthe highest standard should be undertaken; (ii)secondary protection areas surrounding the core areas where some limited and appropriate development can occur, if approved by the appropriate body; (iii)buffer zones that are meant to protect the cultural landscape views in and out of the site, (e.g. rice paddies should be protected rather than developed as parking lots); and (iv) photographic surveys

126 of existing village streetscapes, squares, paths, historic buildings and cultural relics for baseline recording and documentation.

(b) Park Conservation Plans. Park planning should take account of: (i)zoning and land use, cultural and natural resource protection, infrastructure and facilities development, architectural and landscape design standards, interpretation and information development, commercial services management policies, and marketing and promotion; (ii)cultural and natural resource inventory, monitoring and documentation systems that establish base lines and provide ongoing information for strategy development and change management; and (iii)provision of infrastructure, including access roads and parking, pathways, power supply, rest rooms (water supply and sanitation), solid waste collection and disposal, administration buildings, cultural and/or visitor centers, first-aid and safety arrangements, and docks (where applicable).

(c) Conservation of Historic Cultural ProDerty (e.g. temples, gates, streets, walls and monuments, etc.). For the repair and rehabilitation of historic cultural property, all such works must comply with all applicable Chinese law and regulations. The guidelines “Principles for the Conservation of Heritage Sites in China” are available on the China ICOMOS website (http://www.icomoschina.org.cn). The applicable key principles are: (i) a building that no longer exists must not be reconstructed unless there is very strong evidence of structure and style; (ii)each step in the conservation process must be based on the results of research and evidence; (iii)physical remains must be conserved in their historic condition without loss of evidence; original components must be retained as far as possible; (iv) new and additional construction must be clearly distinguishable from the original construction; (v) in undertaking repair, it is not permitted to redo decorative painting for new or gaudy effect; and (vi) surrounding structures and landscapes that undermine the historic and/or visual integrity of cultural property must be addressed to reduce negative impacts.

33, DeJinitions for Conservation of Historic Cultural Property. The following definitions will apply to built-heritage conservation activities.

(a) Adaptive Reuse. Upgrading and rehabilitation of traditional housing for continued use by families or for tourist accommodations will be done in the original building’s architectural style using traditional materials and construction techniques. Upgrading would consider the safe and aesthetic installation of basic services such as electricity and sanitation and improvements to provide increased thermal insulation and wind and waterproofing. These improvements will use fixtures, ducts and materials compatible with historic designs and materials, create minimal destruction of the historic structure and keep visual impact of changes as subtle as possible. General standards and guidelines on the rehabilitation and upgrading of traditional housing in China will be located or, if non-existent, developed for use by homeowners and the private sector, and provided as guidelines.

(b) Rehabilitation. ‘Rehabilitation of traditional buildings’ includes conservation and upgrading of traditional buildings that, to the greatest extent possible, use original

127 materials and construction techniques to return buildings to their original exterior style and state, while adapting only their interiors: (i)to modern standards of living for owner occupants; and/or (ii)for productive uses such as guest houses, restaurants, and museums etc. Any changes to the exteriors to accommodate the adaptations will be kept to the absolute minimum and must use: (i)appropriate scale and height; (ii)compatible materials; (iii)harmonious color and form; and (iv) high quality detail and design. Designs for rehabilitation will be based on the Architectural and Building Design and Construction Manual that illustrates characteristics of each individual site’s architectural forms and details allowable materials and construction techniques. Methods used for installing modern conveniences, such as electricity and water, must not disturb the visual environment or damage the traditional structures.

(c) Restoration. Restoration includes returning the existing fabric of a place to a known earlier state by removing accretions or reassembling existing components without introducing new materials. It is appropriate only if: (i)there is sufficient evidence of the earlier state of the fabric, and (ii)returning the fabric to that state reveals the significance of the place and does not destroy other parts of the fabric.

(d) Reconstruction. The World Bank loan proceeds shall not be used to support the reconstruction (chongjian) of any buildings where there is not strong and substantiated evidence of original style, scale and materials. When there is no evidence, this work will be considered re-creation (zaijian fujian) and will not be eligible for Bank funding.

(e) New Construction. New construction must be carefully integrated into historic areas if the new forms are sensitively developed to be compatible with the old. New construction does not need to copy historic motifs or forms to achieve compatibility but must carefully use: (i)appropriate scale and height; (ii)compatible materials; (iii)harmonious color and form; and (iv) high quality detail and design. Designs for new construction should be evaluated in each specific case by a panel of experts.

(f) Environmental Restoration (e.g. greening, river and pond rehabilitation). Remediation of damaged ecological environments must not be confused with creating environmentally inappropriate landscaping that requires special care or permanent irrigation. Any planting must use indigenous or appropriate non-invasive species in the correct microclimate and topographical location. All planting must be evaluated for its potential to negatively impact character-defining views.

E. Infrastructure in Minority Villages, Scenic Areas and Natural Heritage Sites

34. Community Infrastructure. Community infrastructure falls into two categories: (a) external access roads and main vehicular roads inside the village, parking lots, (at the entrance to the village), spring-sourced water supply, sanitation, storm and wastewater disposal (in wetlands and stabilization ponds), solid waste disposal, and fire protection services; and (b) folk art performance stage/centers, community centers, cultural display centers and workshops.

128 35. Conservation of Ancient, Historic and Traditional Buildings. During project preparation, a list ofpublicly-owned historic, ancient and traditional buildings suitable for conservation was developed. Specialists have selected appropriate buildings from the list provided by communities and developed preliminary conservation proposals in consultation with the concerned communities. Architectural details, construction methods and materials are outlined in the Architectural and Building Guidelines and the OMCP. Detailed designs will be developed during project implementation using these guidelines.

36. Scenic Area and Natural Heritage Site Inpastructure. Infrastructure includes buildings for exhibition, interpretation and presentation, visitor and information centers, visitor rest facilities, access and internal roads, footpaths, hiking and bicycle trails, water supply, sanitary facilities, and solid waste management. All improvements are subject to approval from national and provincial cultural heritage authorities, and preparation ofconservation plans, as appropriate.

37. Visitor Centers, Museums and Exhibition Halls. While some good examples ofmuseums and exhibition halls can be seen at Guizhou’s heritage sites, many ofthese facilities are poorly funded, lack interesting information and are under utilized. Much ofthe information presented for tourists is conveyed in a static manner with an emphasis on statistics and historic chronologies. These methods do little to engage visitor interest or to reveal the rich meaning and value ofthe sites. To further develop these facilities for tourism in Guizhou, it will be necessary to improve exhibits through: research and knowledge development; updated presentation methods; higher quality fixed displays and written materials; and expanded themes that present all the cultural and natural features ofthe sites and appeal to all types ofvisitors - adventure, cultural, and eco-tourists.

38. Visitor centers in gateway towns should supply tourists with objective and neutral information about hotels, restaurants, transport and all nearby attractions. They should have a contact person available to answer specific questions, monitor displays, and provide brochures. Managers could also consider sales oflocal products with profits to be used to help finance exhibits and brochures. Visitor centers in parks should introduce the park, its resources and values and provide the location ofkey facilities, safety messages, temperature readings and weather forecasts, potable water and public toilets, and regional tourism information. Large visitor centers that require large budgets for maintenance, heatinglcooling, and security will not be supported.

39. Appropriate Technology for Inpastructure. Infrastructure constructed on collective land owned by a village will be owned and operated by the village and must be appropriate for rural villages. Project supported infrastructure must be: (a) affordable by communities with low operating costs; (b) based on a simple technology that is within the capability ofcommunities to maintain; and (c) the least cost alternative and appropriate to the size ofthe population it serves. Specifically, the following need to be considered in the choice ofinfrastructure design, technology, and materials.

(a) Provision ofvehicular access inside minority villages should be minimal.

129 (b) Concrete or asphalt paving is not appropriate for roads and footpaths inside villages; paving should be of local materials.

(c) Pedestrian ways of 1.2 m to 1.5 m are adequate; special paths with troughs to collect cattle droppings are not recommended. In most rural conditions, the dung is collected by villagers for use as manure or for biogas plants.

(d) Hiking trails do not need to have surfacing other than clearance and minimal measures to address slopes (with steps of logs or stone), where safety is a concern. Hiking trails should not be a means to construct roads to connect distant villages.

(e) Connector roads and parking lots should be constructed with appropriate local materials for road surfacing, signage and parking lots that are sensitive to the traditional context. Strong consideration should be given to locating parking lots outside ofhistoric towns and villages and scenic areas. Options should consider a series of small lots that can be phased-in based on need, rather than one large lot built for maximum future capacity.

(f) Transporting water over long-distances (5 km-6 km) to serve minority villages is an expensive option. Other lower-cost options such as springs and wells, should be considered. Packaged water treatment plants are not appropriate at the village level. Few villages would be able to pay RMB 0.4/m3 for water.

(g) Piped sewerage and the packaged wastewater treatment plant are not appropriate, as most houses have no flush latrines, they are expensive to operate and maintain, and are not technologies that can be maintained and operated by small rural villages. Low-cost sanitation options, including biogas tanks, twin-pit flush toilets, individual and community septic tanks, and aerated lagoons, should be considered, in this order. Reference should be made to a wealth of literature on this subject on the UNDP and UNICEF websites. These technologies have been successfully used in Asia and Africa.

(h) River embankment improvements are not the focus of the project; cleaning up garbage on river banks should be accompanied by a community education program designed to change behavior.

(i)River dredging to deepen river beds or removal of sediment is not supported under the project.

(i) Provision should not be made for garbage trucks for villages. The villages are not able to operate and maintain garbage trucks. In small villages, garbage may be collected and removed by the county governments, once every seven to 10 days, for which garbage containers of adequate size may be provided. Ifthe county governments are interested, the project could consider providing a garbage truck to service a number ofvillages.

(k) In scenic and natural heritage areas, materials, finishes and installation techniques for walkways, fencing, lighting and other facilities should be given special attention. When

130 feasible, rustic materials such as wood and stone should be used, to ensure visual compatibility.

F. Operation and Maintenance Organization and Funding

40. County governments will provide funds for all capital investments in minority villages, scenic areas and natural heritage sites, including a limited amount offunds to improve private assets and assist individual persons or families in income generating activities.

4 1. Ethnic Minority Villages. Ethnic minority villages are located on collectively-owned land. Ownership of assets created under the project on collective land, will be transferred to communities. As a general rule, those who own the assets have responsibility for their O&M. All assets inside minority villages will be maintained by the villages, and funds for this will be mobilized by the village community. The sources of funds for O&M will consist of: taxes levied by the Village Committee; county government budget transfers; fund collections from the village to undertake specific repairs and maintenance; and revenues from entrance fees and other user fees.

42. Access roads, parking areas and other tourist facilities outside the confines ofthe village will be operated and maintained by the county governments/prefectures. As is the case in the rest ofthe country, provision, O&M ofschools, health facilities, etc. will be the responsibility ofthe county governments/prefectures.

43, Scenic and Natural Heritage Sites. O&M ofscenic areas and natural heritage sites will be carried out by the county-level tourism bureaus using budgets provided by county governments and prefectures. O&M of some natural heritage sites located on collective land will be done by county governments/prefectures. The primary source ofrevenue for O&M is tourist revenue from entrance fees and government budget allocations.

G. Procedures for (a) Rehabilitation and Conservation of Unique Historic Buildings, and (b) Grant Programs for Private House Rehabilitation and Conservation and Intangible Cultural Heritage Protection

44. Rehabilitation and Conservation of Unique Historic Buildings. Based on consultations with communities during project preparation, the technical specialists have identified the unique traditional historic buildings that would be conserved and rehabilitated. Preliminary designs for their rehabilitation and conservation have also been prepared. Prior to implementation, communities will be consulted again through the CPMG to confirm the selection and their subsequent uses. Detailed designs will be prepared in accordance with the Guidelines for Conservation ofTraditional Buildings and Environments in Minority Villages, prepared under the project.

45. Grant Program for Rehabilitation and Conservation of Private Houses. In consultation with all village organizations, the county-level PMO will select beneficiaries whose houses will be rehabilitated or conserved. The total amount ofgrant will be limited by the amount offunds allocated for each village for house rehabilitation and conservation, which was based on the

131 numbers of houses allocated for each village during project preparation. Technical specialists will prepare plans and cost estimates for the rehabilitation and conservation, and recommend the amount of grant for each private house. The grant would cover all or part of the cost of strengthening of the structure, roof, repair ofthe faGade, and some internal space modifications. The cost of internal improvements to houses such as water supply, sanitation, power, etc. will be computed, and will constitute the minimum contribution to be made by the house owner. An implementation agreement will be concluded between the household beneficiary and the county- level PMO setting out the household’s obligations.

46. The following procedures will be adopted for conservation or rehabilitation of private houses in villages:

(a) Private House Annual Work Plan. Annual work plans for private house rehabilitation and conservation will be prepared by the county-level PMO, approved by the Guizhou Provincial Project Management Office (PPMO), and submitted to the Bank for approval. The work plan should include: the list of selected houses; details ofwork proposed; and estimated cost of the work; and the amount of grant proposed to be financed from the loan proceeds. The houses and household beneficiaries should be selected through a participatory approach in accordance with the selection criteria set out in the OMCP.

(b) Private House Implementation Agreement. Based on the approved annual work plan, the county-level PMO will sign an implementation agreement with the individual household beneficiary. The implementation agreement will detail: (i)the scope of work; (ii)total cost of the work, the amount of the loan proceeds to be used to finance the work, and household contribution; (iii)work implementation schedule; (iv) agreed technical and construction standards; (v) supervision and final acceptance procedures; and (vi) payment schedule and conditions.

(c) Payment Schedule and Conditions. The county-level PMO will make available the grant to each household under the implementation agreement in two installments: the first installment, which will be between 30% and 50% ofthe grant upon the signing of the implementation agreement; and the reminder of the grant upon the completion of the work as evidenced by a satisfactory inspection report issued by the county-level PMO.

47. Grant Program for Intangible Cultural Heritage Protection. The package of activities related to the grant program for intangible cultural heritage protection will be based on the results of a participatory community-based process. The county-level PMO will select the types of investments and activities (mostly training and technical assistance) that will be supported in their villages in accordance with the procedures and selection criteria set out in the OMCP. Participatory stocktaking will include, but not be limited to: (a) all heritage resources, their importance and their appropriate interpretation for visitors; (b) the level and type of tourism to develop; and (c) the priorities for traditional activities and/or business opportunities for project support.

48. The following procedures will be adopted for the grant program for intangible cultural heritage protection and preservation: 132 (a) Intangible Cultural Heritage Annual Work Plan. The county-level PMO will select the activities that preserve and protect intangible cultural heritage and village community beneficiaries through a participatory approach and in accordance with the procedures and selection criteria set out in the OMCP. The work plan would include, but not be limited to: the list ofthe selected activities; details ofthe activities, including methods of implementation; and estimated cost ofeach activity and the types and amount of expenditure proposed to be financed from the loan proceeds. The work plan will require the approval ofthe PPMO and the Bank.

(b) Intangible Cultural Heritage Implementation Agreement. Based on the approved annual work plan, the county-level PMO will sign an implementation agreement with the CPMG ofthe village concerned for carrying out the selected intangible cultural heritage protection activities. The implementation agreement will include: the list ofthe selected activities; total cost ofthe activities and the type and amount of expenditures to be financed from the loan proceeds; activity implementation schedule; agreed outputs and reporting and verification requirements; and payment schedule and conditions.

(c) Payment Schedule and Conditions. The county-level PMO will make available the grant to each village under the implementation agreement in two installments: the first installment, equal to 50% of the grant, upon the signing ofthe implementation agreement; and the reminder ofthe grant when the agreed outputs stated in the implementation agreement have been produced and as evidenced by a satisfactory inspection report issued by the county-level PMO.

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COMPONENT 1: ETHNIC MINORITY CULTURAL HERITAGE PROTECTION CHINA 106° 107° 108° 109° ANSHUN MUNICIPALITY 1 Pingba County Tianlong Tunpu Cultural Heritage Protection GUIZHOU CULTURAL AND 2 Xixiu District Jiuzhou Tunpu Cultural Heritage Protection Chang Jiang NATURAL HERITAGE PROTECTION AND (Yangtze) QIANDONGNAN PREFECTURE CHONGQING 29° 3 Congjiang County Basha Miao Ethnic Cultural Heritage Protection DEVELOPMENT PROJECT 4 Congjiang County Duliu River Dong Ethnic Cultural Heritage Protection Daozhen 5 Danzhai County Shiqiao Ancient Papermaking Protection 6 Huangping County Jiuzhou Ancient Town Heritage Protection PROJECT PREFECTURES SUB-PROJECTS 7 Jianhe County Yang’asha Miao Ethnic Cultural Heritage Protection Wuchuan 8 Jinping County Longli Ancient Town Heritage Protection EXPRESSWAYS Chishui Zheng’an Yanhe 9 Kaili City Bala River Miao Ethnic Cultural Heritage Protection HIGHWAYS 10 Leishan County Bala River Miao Ethnic Cultural Heritage Protection MAIN ROADS 11 Leishan County Xijiang Miao Ethnic Cultural Heritage Protection Xishui Dejiang 12 Liping County Zhaoxing Dong Ethnic Cultural Heritage Protection RAILROADS Songtao Tongzi 13 Taijiang County Shidong Miao Ethnic Cultural Heritage Protection COUNTY (XIAN) CAPITALS 14 Tianzhu County Sanmentang Dong Ethnic Cultural Heritage Protection 28° PREFECTURE CAPITALS 28° QIANXINAN PREFECTURE Suiyang Yinjiang 15 Zhenfeng County Nachan Buyi Ethnic Cultural and Natural Heritage Protection PROVINCE CAPITAL SICHUAN Fenggang Sinan COUNTY (XIAN) BOUNDARIES Renhuai COMPONENT 2: NATURAL HERITAGE AND SCENIC SITE PROTECTION AND DEVELOPMENT Meitan PREFECTURE BOUNDARIES Jiangkou ANSHUN MUNICIPALITY Tongren PROVINCE BOUNDARIES Zunyi 16 Guanling County Guanling National Geo-Park Heritage Protection Wanshan Tequ QIANDONGNAN PREFECTURE Zunyi Shiqian 17 Shibing County Shanmu River Cultural and Natural Heritage Protection Jinsha QIANXINAN PREFECTURE Bijie 18 Dingxiao D.Z. Xingyi National Geo Park Dingxiao Guizhou Dragon Heritage Protection Yuping HUNAN Yuqing 19 Xingyi City Wanfenglin National Scenic Park Cultural and Natural Heritage Protection Cengong Dafang Hezhang Xifeng Kaiyang 17 Zhenyuan 27° Qianxi Shibing COMPONENT 3: TOURISM GATEWAY TOWN FACILITIES Weng’an 27° Sansui QIANDONGNAN PREFECTURE AND PROVINCE Tianzhu Huangping 20 Jianhe County Tourist Information and Training Center Weining 14 Xiuwen 6 21 Leishan County Tourist Information Center Nayong 22 Liping County Tourist Information Center Fuquan 13 Jinping 23 Guiyang Guizhou Cultural and Natural Heritage Protection and Development Center 9 24 Jianhe Zhijin Guiyang Guiding Kaili Taijiang 8 24 Qiandongnan Pref. Minority Ethnic Culture Tourism Promotion and Training Shuicheng 7 20 1 23 25 Pingba COMPONENT 4: CAPACITY BUILDING AND IMPLEMENTATION SUPPORT Longli Qiandongnan Prefecture Leishan GUIZHOU PROVINCE Puding Duyun 10 11 21 25 Guiyang Technical Assistance Liping Anshun Danzhai YUNNAN Liuzhi Huishui 12 22 Tequ 2 5 RUSSIAN Changshun Zhenning 26° FEDERATION 26° Guanling 16 Sandu KAZAKHSTAN Rongjiang HEILONGJIANG Anshun Municipality Pingtang Dushan Qinglong Ziyun MONGOLIA Pu’an Congjiang JILIN Pan Xian Sea 3 4 KYRGYZ LIAONING of REP. D.P.R. OF KOREA Japan XINJIANG BEIJING NEI MONGOL BEIJING 15 Luodian TIANJIN REP. OF JAPAN Xingren Zhenfeng Libo HEBEI KOREA SHANXI SHANDONG Yellow Sea Qianxinan Prefecture QINGHAI NINGXIA JIANGSU GANSU Wangmo SHAANXI HENAN Anlong

ANHUI SHANGHAI East Xingyi 25° XIZANG SICHUAN HUBEI 25° ZHEJIANG China 18 GUANGXI NEPAL AREA OF Ceheng MAP CHONGQING Sea 19 HUNAN JIANGXI FUJIAN GUIZHOU This map was produced by the Map Design Unit of The World Bank. National Capital TAIWAN 0 25 50 75 100 The boundaries, colors, denominations and any other information YUNNAN GUANGDONG shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Province Boundaries GUANGXI Philippine KILOMETERS HONG KONG endorsement or acceptance of such boundaries. International Boundaries MACAO Sea VIETNAM

Bay of MYANMAR LAO P.D.R. HAINAN 104° 105° 106° 107° 108° 109° Bengal THAI- PHILIPPINES LAND OCTOBER 2008