The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

REPORT NO.: RES33665 Public Disclosure Authorized

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF ANHUI XUANCHENG INFRASTRUCTURE FOR INDUSTRY RELOCATION PROJECT APPROVED ON JUNE 20, 2013 TO Public Disclosure Authorized PEOPLE’S REPUBLIC OF CHINA

SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE

EAST ASIA AND PACIFIC Public Disclosure Authorized

Regional Vice President: Victoria Kwakwa Country Director: Bert Hofman Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Francis Ghesquiere Task Team Leader: Wanli Fang, Minghe Tao Public Disclosure Authorized The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

ABBREVIATIONS AND ACRONYMS

BOD Biological Oxygen Demand CD Country Director EA Environmental Assessment EIA Environmental Impact Assessment EMP Environmental Management Plan GDP Gross Domestic Product MOU Memorandum of Understanding PDO Project Development Objective PMO Project Management Unit RAP Resettlement Action Plan RMB Ren Min Bi (Chinese Currency) SEA Strategic Environmental Assessment TA Technical Assistance TCE Tons Coal Equivalent WWTP Wastewater Treatment Plant XETDZ Xuancheng Economic and Technological Development Zone The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

BASIC DATA

Product Information

Project ID Financing Instrument P129431 Investment Project Financing

Original EA Category Current EA Category Full Assessment (A) Full Assessment (A)

Approval Date Current Closing Date 20-Jun-2013 30-Sep-2018

Organizations

Borrower Responsible Agency People's republic of China Xuancheng Project Management Office

Project Development Objective (PDO) Original PDO The project aims to contribute to the economic, social and environmental sustainability of the project area in the Xuancheng Economic and Technological Development Zone. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed

IBRD-82700 20-Jun-2013 16-Aug-2013 14-Nov-2013 30-Sep-2018 90.00 51.61 38.39

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)? No

The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

A. Project Status

Overall progress. The project has been under implementation for five years. Earlier it was negatively affected by an economic downturn and had to be reduced in scope through a restructuring approved in January 2017. However, the project is now making progress with the recovery of national economic growth and has gained momentum in achieving its PDO of contributing to the economic, social and environmental sustainability of the project area in the Xuancheng Economic and Technological Development Zone (XETDZ). Since the restructuring, the project has made good progress by implementing physical investments such as the construction of roads and bridges, underground storm-water drainage networks, water supply networks and sewerage networks and wastewater conveyance and treatment as well as in the roll-out of the technical assistance component. The XEDTZ has also managed to attract new industrial units, has increased employment, enhanced value-added while at the same time increasing energy efficiency, put in place new systems to assist job-seekers and is moving towards improving environmental monitoring. The project is currently rated Moderately Satisfactory in both progress toward achieving the PDO and implementation progress.

The two issues that were holding back implementation have been resolved: (a) the technical design for the final discharge of the wastewater treatment plant (WWTP, WWXC-3-3 for $1.36 M) has obtained support from the affected villagers after intensive consultations and socialization as well as receiving the necessary environmental clearances; and (b) the relevant provincial authorities have finally approved the relocation of a state-owned trunk natural gas pipeline so construction on a proposed road can proceed. Nevertheless, resolving these issues took more time than expected, and now the project needs additional time to complete all its planned activities.

PDO level indicators. As of December 31, 2017, net employment created was 4,858 jobs (18 percent of which were female), exceeding the 2017 target of 3,600. Incremental value-added reached 840 million RMB, also exceeding the target of 480 million RMB. Energy input per unit of value-added at 34 TCE per million RMB, well below the target of 94 TCE per million RMB (Note: This indicator measures energy intensity of mass production, so a lower value indicates a better outcome).

Intermediate outputs. As of December 31, 2017, 45.6 km of roads had been constructed and 16,116 residents in the project area had been provided with access to improved water sources and sanitation services, compared to the targets of 45 km roads and 16,000 residents benefiting respectively. In addition, the number of XETDZ staff formally trained was 89 persons (of which 20 percent were women), compared to the target of 80 persons (with 20 percent women). The number of new firms attracted to the zone (with MOU signed) was 172, exceeding the target of 135.

Technical assistance (TA). The Intelligent Investment Promotion System was satisfactorily completed in August 2017 and is now in operation. It has helped XETDZ to accelerate progress of attracting the targeted industries and improving the overall business environment. The Labor Market Information System has been established and is currently under testing. The Internal Monitoring and Evaluation system has been completed and is in operation to monitor key operational and management tasks of the XETDZ, including sectoral data collection and reporting. The Branding and Investment Promotion system is nearing completion. The contract for the design of the Real Time Environmental Monitoring System has been signed.

Institutional capacity. Although the institutional arrangements are in place, the PMO is seriously under-staffed, which has led to lapses in project management and implementation (e.g., previous delays in finalizing the technical design and completing the bidding process of the effluent outfall for the WWTP). The Bank has emphasized the need to strengthen capacity by adding technical staff and seeking higher-level intervention in coordination with various stakeholders. Since the mid-term review The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

mission, the senior management of the XETDZ has urged the PMO to conduct re-alignment of tasks among relevant departments. Now the PMO has put in place designated staff for key tasks such as procurement, financial management, construction management and environmental/social safeguards. As a result, the PMO has been much more effective and responsive in resolving the pending issues of project implementation and in preparing this restructuring package.

Risks to achieving the PDO remain substantial mainly due to the delays in completion of a few key contracts because of factors beyond the control of local government (i.e., relocation of a state-owned trunk natural gas pipeline underneath one major road project; failure of a contractor; lagging economic conditions earlier in implementation; villagers’ objections to the original design of the effluent outfall for the WWTP, which was revised and agreed on now). The economic outlook for XETDZ going forward is promising, given the improvement in infrastructure and doing-business environment, to which this project has made contributions.

B. Rationale for restructuring

Extension of the Loan closing date. The borrower has requested an 18-month extension of the loan closing date to March 31, 2020. This is to allow the completion of: 1) two major road contracts (total cost $27 million) that are critical to achieving the PDO on economic sustainability (Note: one contract has already been signed with a duration of 18 months and the second contract, with a contract duration of 12 months, was opened for bidding in June 2018); 2) the effluent outfall for the WWTP, the technical design of which has been finalized and bidding is in progress; construction is expected to take about 12 months; and 3) the real-time environmental pollution monitoring system for which the contract has already been signed.

The project has loan savings of about US$4-6 million that the client would like to use to fund new activities that will also require additional time (See details below in Section D). An extension of the loan closing date will also allow the full benefits of the TA components, e.g., the intelligent business promotion system, the labor market information system and the branding and investment promotion strategy to materialize, and the M&E TA may be used to gather additional data to monitor the project’s outcomes and learn lessons, and to provide further evidence of the project’s economic, social and environmental achievements.

II. DESCRIPTION OF PROPOSED CHANGES

C. Project development Objective

N.A.

D. Changes to Components and Costs

Utilization of loan savings for new activities. No changes to the Project components are proposed, but the borrower identified potential loan savings of about US$4-6 million due to efficient procurement and would like to use the funds to procure: 1) data collection devices and software to expand the functionality of the real-time pollution monitoring system; 2) equipment for an intelligent urban transport system including traffic signal control, cameras and a central monitoring center, etc. to reduce traffic accidents while strengthening the efficiency of the XETDZ; 3) an underground pipeline monitoring system to enable timely detection of malfunctions and overflows in storm events and facilitate maintenance which will add to environmental sustainability; 4) equipment for urban utility checking/maintenance and emergency response and management. The estimated cost of this equipment will be around $4.6 million. This equipment will help XETDZ management monitor traffic, the The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

water/sanitation system, and drainage issues, and will allow zone management to be more proactive and more resilient to disasters which will contribute to its environmental and social sustainability consistent with the PDO. The updated traffic signaling could improve traffic flows and contribute to economic and environmental sustainability.

E. Change in Implementation Schedule

The implementation schedule is lengthened in alignment with the 18-month extension to complete two road contracts, effluent outfall for the WWTP, and the procurement and installation of the real-time environmental pollution monitoring system and other equipment as listed above. The disbursement projections are extended to match.

F. Changes in the Results Framework

The current results framework includes an energy intensity indicator to measure environmental sustainability (i.e., energy input per unit of value-added) and the targets in the past a few years were satisfactorily met. However, the project does not fund activities that directly contribute to improving energy efficiency which indicates an attribution problem. After consulting with the client, the Bank decided to stop monitoring this indicator. As a substitute for this environmental sustainability indicator, a surface water quality indicator is being added, as the main environmental benefits come from the operation of the WWTP. In addition, the current results framework does not have sufficient representation of social sustainability. An indicator measuring the beneficiary satisfaction rate is added to capture this, and data will be collected from annual surveys of workers, residents and entrepreneurs in the XETDZ. The total volume of wastewater treated is expected to be below original projections because the project area was downsized during the first restructuring and XETDZ has been avoiding industries that are water-intensive. However, the percentage of wastewater treated is expected to be high upon the completion of this WWTP, and this would provide an alternative perspective to evaluate the project’s positive environment contributions. Target values of some indicators are also adjusted to be in line with actual progress and present more realistic projections given the proposed 18- month extension.

Summary of changes to indicators: 1) Drop the energy intensity indicator (i.e., energy input per unit of value-added); 2) Add a surface water quality indicator (i.e., ratio of water quality compliance across monitored river sections) to capture the environmental benefits of building the WWTP; 3) Add a beneficiary satisfaction indicator to capture the project’s contribution to social sustainability; 4) Add a wastewater treatment coverage ratio indicator to reflect the positive environmental impact of the WWTP; 5) Change end-of-project targets for two KPIs: (a) increase the final target for Net employment created to 5,700 jobs; and (b) increase the final target for incremental value-added to RMB 950 million. These two outcomes are increased due to the pick-up in economic activity and the 18-month extension; 6) Reduce the end-of-project targets for “Volume of wastewater treated per day to standard Class 1A” and “Volume (mass) of BOD pollution load removed” to reflect the fact that new firms are much less water-intensive and are therefore producing less pollutants than expected. (See details in the notes under each indicator).

III. SUMMARY OF CHANGES

Changed Not Changed Results Framework ✔ Components and Cost ✔ The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Roads and Bridges 162.37 Revised Roads and Bridges 160.64 Wastewater Conveyance, Wastewater Conveyance, 20.88 Revised 21.23 Treatment and Discharge Treatment and Discharge The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

Institutional Development and Institutional Development and 5.00 Revised 6.38 Capacity Building Capacity Building TOTAL 188.25 188.25

OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S)

Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-82700 Effective 30-Sep-2018 31-Mar-2020 31-Jul-2020

OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES

Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed

IBRD-82700-001 | Currency: USD

iLap Category Sequence No: 1 Current Expenditure Category: Works

81,125,000.00 36,881,418.81 78,000,000.00 100.00 100.00

iLap Category Sequence No: 2 Current Expenditure Category: Goods

3,500,000.00 2,886,558.08 8,025,000.00 100.00 100.00

iLap Category Sequence No: 3 Current Expenditure Category: Consultants' services

3,320,000.00 1,442,352.69 2,600,000.00 100.00 100.00

iLap Category Sequence No: 4 Current Expenditure Category: Training and Workshops

1,680,000.00 30,699.40 1,000,000.00 100.00 100.00

iLap Category Sequence No: 6 Current Expenditure Category: PREMIUM FOR CAPS/COLLARS

0.00 0.00 0.00 The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

Total 89,625,000.00 41,241,028.98 89,625,000.00

OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES

Change in Disbursement Estimates Yes

Year Current Proposed 2013 0.00 0.00

2014 2,000,000.00 2,000,000.00

2015 4,824,940.96 4,824,940.96

2016 9,256,987.15 9,256,987.15

2017 19,198,752.90 16,306,273.91

2018 29,000,000.00 18,849,678.44

2019 25,719,318.99 28,762,119.54

2020 0.00 10,000,000.00

The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

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Results framework COUNTRY: China Anhui Xuancheng Infrastructure for Industry Relocation

Project Development Objectives(s) The project aims to contribute to the economic, social and environmental sustainability of the project area in the Xuancheng Economic and Technological Development Zone.

Project Development Objective Indicators by Objectives/ Outcomes

RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target

2013 2019 Economic sustainability (Action: This Objective is New)

Net employment created (number of jobs) (Number) 0.00 5,700.00

Action: This indicator has been Revised

Incremental value-added (RMB million) (Number) 0.00 950.00

Action: This indicator has been Revised

Social sustainability (Action: This Objective is New)

Women as percentage of net employment created (Percentage) 0.00 25.00

Action: This indicator has been Revised

Satisfaction of beneficiaries (Percentage) 0.00 70.00

Action: This indicator has been Revised

Environmental sustainability (Action: This Objective is New) Energy input per unit of value-added (TCE per RMB million) 109.00 93.00 (Number) The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target

2013 2019

Action: This indicator has been Marked for Deletion

Ratio of water quality compliance under monitoring (Percentage) 0.00 75.00

Action: This indicator has been Revised PDO Table SPACE

Intermediate Results Indicators by Components

RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target

2013 2019 Transport accessibility (Action: This Component is New)

Roads constructed, non-rural (Kilometers) 0.00 50.00

Action: This indicator has been Revised

Water supply, sanitation service and wastewater treatment (Action: This Component is New) Number of people in urban areas provided with access to 5,000.00 18,000.00 Improved Water Sources under the project (Number)

Action: This indicator has been Revised

People provided with access to "improved sanitation facilities” 5,000.00 18,000.00 under the proj. (CRI, Number)

Action: This indicator has been Revised

Volume of wastewater treated per day to standard Class 1A 0.00 3,000.00 (Cubic Meter(m3))

Action: This indicator has been Revised The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target

2013 2019 Volume(mass) of BOD pollution load removed by treatment plant 0.00 153.00 under the project (Tones/year)

Action: This indicator has been Revised

Coverage of wastewater treatment service (Percentage) 0.00 70.00

Action: This indicator has been Revised

Smart governance and improved doing business environment (Action: This Component is New)

Rollout of an intelligent investment promotion system (Yes/No) No Yes

Rollout of a labor market information system (Yes/No) No Yes Rollout of enhanced XEDTZ internal monitoring and evaluation No Yes system (Yes/No)

Rollout of a real time environmental monitoring system (Yes/No) No Yes

Number of firms attracted (Number) 0.00 200.00

Action: This indicator has been Revised

Capacity building (Action: This Component is New)

Number of XETDZ staff formally trained (Number) 0.00 110.00

Action: This indicator has been Revised

Women as percentage of persons trained (Percentage) 0.00 30.00

Action: This indicator has been Revised IO Table SPACE The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)

. The World Bank Anhui Xuancheng Infrastructure for Industry Relocation (P129431)