Document of The World Bank FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: ICR00004961

IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD-82490

ON A

LOAN FROM THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Public Disclosure Authorized IN THE AMOUNT OF US$80 MILLION

TO THE

PEOPLE'S REPUBLIC OF

FOR A WATER ENVIRONMENT PROJECT

Public Disclosure Authorized June 22, 2020

Urban, Resilience And Land Global Practice East Asia And Pacific Region

Public Disclosure Authorized

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

CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2020) Currency Unit = Renminbi (RMB) RMB¥6.94 = US$1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

CPF Country Partnership Framework CPS Country Partnership Strategy EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan FEP Flood Emergency Plan FM Financial Management FWS Flood Warning System FYP Five-Year Plan GRM Grievance Redress Mechanism ICR Implementation Completion and Results Report IRI Intermediate Results Indicator IUFR Interim Unaudited Financial Report ISR Implementation Status and Results Report LID Low Impact Development LMG Laibin Municipal Government LWIC Laibin Water Investment Company M&E Monitoring and Evaluation O&M Operation and Maintenance PAD Project Appraisal Document PAP Project Affected Person PDO Project Development Objective PIU Project Implementation Unit PMO Project Management Office RAP Resettlement Action Plan RF Results Framework TA Technical Assistance TTL Task Team Leader

Regional Vice President: Victoria Kwakwa

Country Director: Martin Reiser

Regional Director: Benoit Bosquet

Practice Manager: Francis Ghesquiere

Task Team Leader(s): Guangming Yan

ICR Main Contributor: Mats Andersson

TABLE OF CONTENTS

DATA SHEET ...... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ...... 5 A. CONTEXT AT APPRAISAL ...... 5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ...... 9 II. OUTCOME ...... 12 A. RELEVANCE OF PDOs ...... 12 B. ACHIEVEMENT OF PDOs (EFFICACY) ...... 12 C. EFFICIENCY ...... 16 D. JUSTIFICATION OF OVERALL OUTCOME RATING ...... 17 E. OTHER OUTCOMES AND IMPACTS ...... 18 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ...... 19 A. KEY FACTORS DURING PREPARATION ...... 19 B. KEY FACTORS DURING IMPLEMENTATION ...... 20 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 21 A. QUALITY OF MONITORING AND EVALUATION (M&E) ...... 21 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ...... 22 C. BANK PERFORMANCE ...... 24 D. RISK TO DEVELOPMENT OUTCOME ...... 25 V. LESSONS AND RECOMMENDATIONS ...... 26 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...... 28 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ...... 35 ANNEX 3. PROJECT COST BY COMPONENT ...... 37 ANNEX 4. EFFICIENCY ANALYSIS ...... 38 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 45 ANNEX 6. SUPPORTING DOCUMENTS ...... 49 ANNEX 7. PHOTOS OF PROJECT ACHIEVEMENTS AND PROJECT MAP ...... 50

The World Bank Guangxi Laibin Water Environment Project (P126817)

DATA SHEET

BASIC INFORMATION

Product Information Project ID Project Name

P126817 Guangxi Laibin Water Environment Project

Country Financing Instrument

China Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Organizations

Borrower Implementing Agency

People's Republic of China Laibin Development and Reform Commission

Project Development Objective (PDO)

Original PDO The proposed Project Development Objective (PDO) is to reduce flood risks and improve drainage in selected areas of Laibin city.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing

80,000,000 66,000,000 62,756,145 IBRD-82490 Total 80,000,000 66,000,000 62,756,145

Non-World Bank Financing 0 0 0 Borrower/Recipient 47,380,000 60,250,000 52,183,855 Total 47,380,000 60,250,000 52,183,855 Total Project Cost 127,380,000 126,250,000 114,940,000

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing 31-May-2013 08-Nov-2013 09-May-2016 31-Jan-2019 31-Jan-2020

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions 19-Jun-2017 27.74 Change in Results Framework Change in Components and Cost Reallocation between Disbursement Categories 15-Jan-2019 39.27 Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Cancellation of Financing Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Implementation Schedule

KEY RATINGS

Outcome Bank Performance M&E Quality Moderately Satisfactory Satisfactory Substantial

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The World Bank Guangxi Laibin Water Environment Project (P126817)

RATINGS OF PROJECT PERFORMANCE IN ISRs

Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 23-Jun-2013 Satisfactory Satisfactory 0

02 24-Dec-2013 Satisfactory Satisfactory 0

03 15-Jun-2014 Satisfactory Moderately Satisfactory 0

04 07-Dec-2014 Moderately Satisfactory Moderately Satisfactory 0

05 28-May-2015 Moderately Satisfactory Moderately Satisfactory 5.00 Moderately 06 30-Nov-2015 Moderately Unsatisfactory 7.01 Unsatisfactory Moderately 07 20-Jun-2016 Moderately Unsatisfactory 10.64 Unsatisfactory Moderately 08 28-Nov-2016 Moderately Unsatisfactory 14.47 Unsatisfactory 09 22-Jun-2017 Moderately Satisfactory Moderately Satisfactory 27.74

10 27-Nov-2017 Moderately Satisfactory Moderately Satisfactory 37.99

11 17-Apr-2018 Moderately Satisfactory Moderately Satisfactory 44.42 Moderately 12 23-Jul-2018 Moderately Unsatisfactory 44.42 Unsatisfactory 13 12-Dec-2018 Moderately Satisfactory Moderately Satisfactory 39.27

14 01-Mar-2019 Moderately Satisfactory Moderately Satisfactory 44.01

15 14-Jun-2019 Satisfactory Satisfactory 46.18

16 25-Dec-2019 Moderately Satisfactory Moderately Satisfactory 54.40

SECTORS AND THEMES

Sectors Major Sector/Sector (%)

Public Administration 9 Sub-National Government 2 Other Public Administration 7

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Transportation 7 Other Transportation 7

Water, Sanitation and Waste Management 84 Sanitation 50 Other Water Supply, Sanitation and Waste 34 Management

Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Urban and Rural Development 27

Urban Development 27

Urban Infrastructure and Service Delivery 27

Environment and Natural Resource Management 121

Climate change 48

Adaptation 48

Water Resource Management 73

Water Institutions, Policies and Reform 73

ADM STAFF

Role At Approval At ICR

Regional Vice President: Pamela Cox Victoria Kwakwa

Country Director: Klaus Rohland Martin Raiser

Director: John A. Roome Benoit Bosquet

Practice Manager: Mark R. Lundell Francis Ghesquiere

Task Team Leader(s): Paul Procee Guangming Yan

ICR Contributing Author: Mats Andersson

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The World Bank Guangxi Laibin Water Environment Project (P126817)

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context

1. Country context. China’s cities have grown at a rate and scale never seen before in human history. About 380 million people have moved from rural to urban areas over the last two decades, and another 300 million people are expected to migrate by 2025. While the rapid urbanization at appraisal (and still today) has been a driver of economic growth and has helped raise living standards, it has also brought significant environmental problems, destruction of natural resources and ecosystems, and increased energy demands. This growth has created tremendous challenges for the delivery of basic urban services, especially in secondary cities and lagging regions. During the last decade, the central and local governments have stimulated further urbanization and the growth of western regions and small to mid- size cities. China is vulnerable to the adverse impact of climate change, which could intensify water shortages, increase the incidence of extreme temperature events and consequent flooding and droughts, and reduce the yields of major crops.

2. Laibin City. Laibin City, the project area, is the main urban area of the much larger Laibin Municipality.1 It is located in the central part of Guangxi Zhuangzu Autonomous Region (‘Guangxi’) in southern China, and historically it is one of the poorest areas in the country. The city is connected to major highways, railways, and the Hongshui River, which is a major waterway to , Hongkong, and . At the time of appraisal, Laibin was experiencing strong economic growth and rapid urbanization,2 which put tremendous pressure on its urban environment. Water demand and pollution levels dramatically increased as a result of urban expansion, economic growth, and improved living standards, and the capacity of flood and drainage systems was a major concern.

3. Sectoral context. The city’s available water resources, including the Hongshui River and its main tributaries, Longdong River, Beizhijiang River, and Caoxiegou Stream, were under mounting pressure from rapid urbanization and economic growth. This was amplified by an uneven temporal distribution of rainfall, high evaporation rates, and a thin soil layer. Every four to five years the city experienced a major flood. Problems were exacerbated by dumping of solid waste into drainage channels, which reduced the water flow and increased the vulnerability to water logging from intense rainfall events. During the dry months, Laibin experienced droughts, which made ensuring minimum flow in the city’s canal system a challenge. The storm drainage and flood control systems in the central area of Laibin City were underperforming due to inadequate engineering, incomplete works, lack of maintenance, and deficient waste management. Climate change is expected to cause parts of the city to become high-risk flood areas, further increasing the city’s vulnerability. Laibin City also faced surface water pollution. The city’s creeks were heavily

1 Laibin City’s population increased from 120,000 in 2002 to 260,000 in 2010 (according to the 2010 population census). In the 2019 census, it was 472,000, and the city’s Master Plan for 2008–2025 projects that the population will increase to 600,000 by 2025. The population of Laibin Municipality was 2.5 million in 2010 and 26.5 million in 2019. 2 Guangxi had experienced substantial growth with per capita gross domestic product increasing from RMB 3,304 (around US$400) in 1995 to RMB 16,750 (around US$2,470) in 2010 (according to regional yearbooks). However, Guangxi’s per capita economic output still lagged behind the national average.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

contaminated and were unfit for direct human contact and fishing according to the national water pollution standards. Most of the collected domestic wastewater was discharged directly into waterways without treatment, affecting downstream communities. While the city had a wastewater treatment plant, it was only operating at around 66 percent of its capacity due to an incomplete collection network.

4. Given these challenges, Laibin Municipality pursued strategies to improve the urban environment and promote sustainable urban development. It sought to do so by constructing and rehabilitating a 60 km drainage network of 13 canals and four lakes in the northern district and constructing river flood protection infrastructure and expansion of drainage networks and wastewater collection systems in the old downtown areas. It was in this context that the World Bank was requested to assist Laibin to improve the effectiveness of its flood management and drainage system, reduce pollution of its waterways, and reduce the risks from future floods to the city’s people, economy, and development.

5. Government strategies. The Government’s 12th Five-Year Plan (FYP) for 2011–2015 defined a strategic plan to actively, yet prudently, proceed with urbanization. In 2010, stimulated by relevant policies from different ministries, various cities exerted great efforts to build innovative cities for better development and model cities for environment protection. These policies covered a broad range of elements in urbanization, such as transportation, storm water drainage, environment protection, relocation of industries, management of public records, and utilization of renewable energy. Environment protection, energy conservation, and sustainable public services were integrated into the urbanization development process.

6. Rationale for World Bank support. The project was to support the implementation of the local FYP for 2011–2015, a Flood and Drainage Plan, and the Laibin City Master Plan for 2008–2025, which called for the construction of river flood protection infrastructure, the rehabilitation and expansion of the storm water and drainage network, and the improvement of the city’s water environment. The project was part of the World Bank’s extensive urban environment program in China, which supported similar investments in another large city () in Guangxi, making it a strong partner to support this project. Innovative designs of integrated flood risk management and sustainable drainage systems were to benefit from the World Bank’s global knowledge.

7. Higher-level objectives to which the project contributed. The project was aligned with both China’s 12th FYP for 2011–2015 and the World Bank’s Country Partnership Strategy (CPS) for FY2013– 2016. Consistent with China’s priorities, the CPS aimed to help the country achieve economic growth, environmental improvements, and social inclusion. The project directly contributed to two CPS themes: (a) green growth, managing resource scarcity and environmental challenges, and (b) promotion of more inclusive development. The project aimed to support green growth by improving drainage and sewerage systems and surface water quality and to support inclusive development by enhancing public services and opportunities in the city.

Theory of Change (Results Chain)

8. The project’s original theory of change (results chain) is illustrated in figure 1. The Project Development Objective (PDO) was to “reduce flood risks and improve drainage in selected areas of Laibin

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The World Bank Guangxi Laibin Water Environment Project (P126817)

City.” 3 To achieve the PDO, the project was to help catalyze an integrated approach to flood risk management and drainage control in Laibin City through a combination of structural and nonstructural measures. To support the objective of reduced flood risk, the project was to invest in flood control facilities, strengthened embankments, and a flood management strategy and systems capacity, including a flood emergency plan (FEP) and a real-time flood warning system (FWS). To support the objective of improved drainage, the project was to invest in drainage facilities, drainage and sewage pipelines, and clean-up and desilting of a canal. Technical assistance (TA) and training for improved planning and management practices were to enhance the city’s capacity for operation and maintenance (O&M), monitoring and evaluation (M&E), capital investment planning and asset management, and project management, to ensure the sustainability of the two outcomes. The underlying assumption in the theory of change was that O&M plans were implemented. It was also assumed at the design stage that the city’s master plan would not change in ways which would significantly affect the project area during the life of the project.

Figure 1. Theory of Change (Results Chain)

3 As per the Project Appraisal Document (PAD) and Loan Agreement.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Project Development Objectives (PDOs)

9. As stated in the PAD and Loan Agreement, the PDO was to reduce flood risks and improve drainage in selected areas of Laibin City. The selected areas were mainly along Hongshui River and Beizhijiang River and in the central old town of Laibin City, which were frequently inundated by river floods and storm water.

Key Expected Outcomes and Outcome Indicators

10. The indicators linked to the PDO statement were the following:

• Outcome 1: Reduce flood risks in selected areas of Laibin City o Percentage of population within the existing urban area vulnerable to 1-in-50-year river floods (%) • Outcome 2: Improve drainage in selected areas of Laibin City o Urban area serviced by exclusive4 and improved drainage system (km2) Components

11. The project consisted of four components:

12. Component 1: River Flood Risk Management (original total cost: US$58.99 million; actual cost: US$66.01 million). (a) Upgrading of flood protection-related infrastructure along the Hongshui, Beizhijiang, and Longdong Rivers, including strengthening of existing natural embankments, and construction and/or rehabilitation of pumping stations, sluice gates, and flood protection dikes, and (b) installing of an integrated flood control and water quality monitoring system.

13. Component 2: Improving Urban Drainage (original total cost: US$66.56 million; actual cost: US$47.5 million). (a) Rehabilitating water streams through, among others, cleaning-up and desilting of canals, rehabilitation of natural embankments, ecological restoration and revegetation of embankments, and construction of regulating gates and rubber dams; (b) expanding and separating sewage and storm drainage networks in the old urban area of Laibin City through, among others, construction of sewage and drainage pipelines, separation of storm drains and sewers, and construction of drain outlets and wastewater separation points; (c) constructing and rehabilitating pumping stations, control and sluice gates, and rubber dams; and (d) piloting Low Impact Development (LID) practices, that is, low-impact sustainable drainage systems along urban roads of Laibin City, with increased vegetation, vegetative and bio-retention swales, permeable pavements (of parking and driveways), water reuse, upgrading of traffic and road designs for traffic safety, and improvement of nonmotorized and public transport facilities (small-scale civil works with limited construction impacts).

14. Component 3: Technical Assistance and Capacity Building (original allocation: US$0.50 million; actual cost: US$0.82 million). Providing TA and capacity building on (a) integrated flood risk management, including flood control and risk reduction, through development of flood maps, improvement of modeling

4 Exclusive refers to a separate drainage system from the sewerage system.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

capacity, and design and implementation of early warning systems, and (b) asset management and capital replenishment, aimed at improving the O&M of assets, budgeting, and training of staff.

15. Component 4: Project Management and Supervision (original allocation: US$1.30 million; actual cost: US$0.61 million). Supporting the ability of the Project Management Office (PMO) and the Project Implementing Agency, Laibin Water Investment Company (LWIC), to coordinate and manage the implementation of the project, including (a) financial management (FM), procurement, contract supervision, and reporting; (b) outcome M&E; (c) construction supervision; and (d) ensuring of adequate implementation of environmental and social safeguards instruments.

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION

16. The project underwent two Level 2 restructurings: in June 2017 and in January 2019. Details on these restructurings and their underlying reasons are as detailed in the following paragraphs.

Revised PDOs and Outcome Targets

17. No changes were made to the PDO and the types of economic benefits expected of the project.

Revised PDO Indicators

18. Two changes were introduced to the PDO-level Indicators:

(a) In the June 2017 restructuring, a third PDO-level indicator, ‘Direct beneficiaries of the project, with percentage of women’ was added with a target of 234,000 persons (50 percent women). The target was reduced to 199,600 persons (48 percent women) in the January 2019 restructuring. (b) In the January 2019 restructuring, the target value for PDO indicator ‘Percentage of population within existing urban area vulnerable to 1-in-50-year river floods’ was changed from 10 percent to 23 percent.

19. In terms of intermediate results indicators (IRIs), the following changes were introduced:

Table 1. Changes to the IRIs Original IRIs Revised IRIs Restructuring Date Component 1: River Flood Risk Management Length of embankments and slopes Length of embankments and slopes June 2017 strengthened (target: 11.6 km) strengthened (target: 10 km) Length of embankments and slopes January 2019 strengthened (target: 4.5 km) Total area subject to inundation by 1-in-50- Total area subject to inundation by 1-in-50- January 2019 year river floods (target: 5 km2) year river floods (target: 8.21 km2) Component 2: Improving Urban Drainage Km of newly constructed drainage pipelines Km of newly constructed drainage pipelines June 2017 (target: 26 km) (target: 12 km)

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Original IRIs Revised IRIs Restructuring Date Km of newly constructed sewage pipelines Km of newly constructed sewage pipelines June 2017 (target: 21 km) (target: 15 km) People benefitting from ‘improved People benefitting from ‘improved June 2017 drainage/sanitation facilities’ under the drainage/sanitation facilities’ under the project (disaggregated by gender) (target: project (disaggregated by gender) (target: 282,000, 50% females) 127,500 persons, 48 percent women) Component 3: Technical Assistance and Capacity Building Preparation of Asset Management Plan by Dropped June 2017 the Laibin Water Investment Company (target: final plan in place) Completion status of flood hazard and risk Unchanged maps for the city (target: maps complete) Component 4: Project Management and Supervision Number of staff from PMO and related Unchanged bureaus (including decision makers) who attend training and study tours (both domestic and international) (target: 300- person training days)

Revised Components

20. During the June 2017 restructuring, the asset management and capital investment planning capacity TA was cancelled under Component 3. During the January 2019 restructuring, flood management activities in Longdong River and LID practices for storm water management as a pilot (small-scale civil works with limited construction impacts) were cancelled.5

Other Changes

21. Reallocation between disbursement categories. In the June 2017 restructuring, the disbursement percentage of the works and goods category was increased from 84 percent to 100 percent.

22. Change in loan closing date. The loan closing date was extended by 12 months to January 31, 2020, in the January 2019 restructuring.

23. Cancellation of financing. The January 2019 restructuring included a cancellation of US$14 million IBRD proceeds under the works and goods category (with subsequent reductions in the project cost from US$140.25 million to US$126.25 million in the financing plan).

Rationale for Changes and Their Implication on the Original Theory of Change

24. After an unprecedented urban growth since project start, and in anticipation of the 2019 Guangxi Horticulture Expo, in 2018 the Laibin Municipal Government (LMG) revised its urban master plan and

5 The intended LID was designed to be a small pilot in a park. The borrower had difficulty in securing the sites, and the quality of the design by a consultant did not meet the guideline of a national sponge city program which was under way in China at the time. Therefore, the borrower did not consider the intended pilot worth pursuing.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

amended a land use plan downstream of Longdong River to accommodate new developments. This had a direct impact on planned project-supported flood management investments in Longdong River as the flood management plan and technical designs needed to be revised. Since such alignment would take significant time, causing serious delays to the project, the subcomponent was cancelled.6 Thereby, the length of strengthened embankments and slopes was reduced.

25. The study of Municipal Asset Management was completed under another Bank-supported task which selected Laibin as one of the pilot cities for the case study (World Bank Policy Research Working Paper: Municipal Asset Management in China’s Small Cities and Towns7). The results of this study were disseminated and well received in Laibin. Therefore, the project activity for technical assistance and capacity building on asset management and capital replenishment under the Part C (ii) of the project was no longer needed.

26. The IRIs were modified to align with an optimized embankment design, cancellation of a contract, and removal of a planned study.8 Targets for some indicators needed revision. It was also considered appropriate to add a beneficiary indicator to measure the overall reach of the project to male and female beneficiaries.

27. The increase of disbursement percentage for works and goods was needed to enable full utilization of the loan proceeds. The project had unused resources due to embankment design optimization, lower than planned bids, cancellation of one sewerage and drainage contract (due to the urban planning change), and an exchange rate fluctuation, expected to result in US$10 million of unused resources early in the project implementation.

28. The 12-month extension of the loan closing date was to allow all construction contracts to be completed following implementation delays, as explained in section III.B. The extension was also to allow time for testing and implementation of the FWS and the FEP, expected to result in better flood risk management results.

29. The original theory of change was strengthened by the added PDO indicator ‘Direct beneficiaries of the project, with percentage of women’. The short- and medium-term outcomes related to vulnerability to floods and area of improved drainage were negatively affected by the changes, but the impacts were mitigated by an optimized embankment design and the schedule extension.

6 The LMG has since instructed the Laibin Water Conservancy Bureau to implement the revised flood management plan with local financing starting in 2021. 7 http://documents.worldbank.org/curated/en/970471488824140310/pdf/WPS7997.pdf. 8 A Municipal Asset Management study was completed by a separate World Bank-supported project which selected Laibin as a pilot case city. The results were disseminated and well received in Laibin. Such a study was no longer needed in this project.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

II. OUTCOME A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

Rating: High

30. The project’s objective of reduced flood risks is highly relevant to China’s 13th FYP for 2016–2020, which emphasizes the importance of “accelerating the perfection of the ecological environment;” specifically, strengthening water safety protection (Article 31); promoting the intensive and economic use of resources (Article 43); expanding the comprehensive governance of the environment (Article 44); and strengthening the restoration and protection of the environment (Article 45). The project’s objective of improved drainage is highly relevant to the 13th FYP’s emphasis on maintaining and strengthening “a harmonious society,” “reduce inequalities,” and “accelerate rural revitalization”. Specifically, it is relevant to the 13th FYP’s focus on (a) promoting a new type of urbanization by accelerating the urbanization of the agricultural population (Article 32), constructing harmonious and livable cities (Article 34), and promoting coordinated development of urban and rural areas (Article 36) and (b) improving people’s livelihood by increasing the supply of public services (Article 61) and securing the basic rights of women, minors, and the disabled (Article 66). Several of these priorities are also expected to be present in China’s forthcoming 14th FYP. The National New-type Urbanization Plan of China for 2014–2020 also stresses the importance of improving infrastructure and public services in urban areas as driving forces of local economic development. The PDO is consistent with two of the three themes in the World Bank Group’s China Country Partnership Framework (CPF) for FY2020–2025 (Report No.117875-CN), namely promoting greener growth and sharing benefits of growth. The project reduced water pollution and strengthened natural resource management (water governance), which are also emphasized in the CPF.

B. ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Achievement of Each Objective/Outcome

31. The assessment of the level of PDO achievement is unpacked into two outcomes: reduce flood risks in selected areas of Laibin City and improve drainage in selected areas of Laibin City. The achievement of outcomes and intermediate results specified in the Results Framework (RF), as amended in the restructurings, is shown in tables 2 and 3, respectively, and in annex 1. In summary, by closing, all the revised targets were met or exceeded. The project had also related positive impacts in terms of climate change and green infrastructure. The PDO was met with the construction and operation of the dikes and pumping stations and the separation of sewer and storm drainage systems, which reduced flood risks and improved drainage in selected areas of Laibin City.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Outcome 1: Reduce flood risks in selected areas of Laibin City

32. This outcome was measured by PO-1: Percentage of population within existing urban area vulnerable to 1-in-50-year river floods9 (original target: 10 percent; revised target: 23 percent); PO-3: Direct beneficiaries10 of the project, with percentage of women (original target 234,000, 50 percent women; revised target: 199,600, 48 percent women); IRI-1: Length of embankments and slopes strengthened (original target: 11.6 km; revised target: 4.5 km); IRI-2: Total area subject to inundation by 1-in-50-year river floods (original target: 5 km2; revised target: 8.21 km2); IRI-7: Completion status of flood hazard & risk maps for the city (original target: maps complete; no revised target). 33. Achievements under these outcome indicators are entirely attributed to the reduced flood risks created by the project in the selected areas of Laibin. Based on these targets, this outcome was substantially achieved compared to the original targets and fully achieved compared to the revised targets. At closing, 199,600 (48 percent women) persons directly benefitted from the project. The population within existing urban area vulnerable to 1-in 50-year river floods was reduced from 72 percent (baseline) to 23 percent, a considerable reduction compared to the baseline, even if the original target was more ambitious. The total area subject to inundation by 1-in-50-year river floods was reduced from 30 km2 (baseline) to 8.21 km2, thus meeting the revised target and nearing the original target. 34. The project supported these results by financing (a) a flood risk management strategy and systems capacity through developing an FWS and an FEP with flood hazard and risk maps for the city; 11 (b) construction of flood control facilities, including vegetation of natural embankments 12 and slopes, pumping stations, gates, and dikes along the Hongshui and Beizhijiang Rivers; (c) capacity building on flood risk management to relevant departments of the LMG (see also Section II. E. Institutional Strengthening), and development of O&M plans for the constructed assets. The LMG adopted action plans for the assets which informed budget allocations for the O&M (these expenditures are small compared to the city’s fiscal revenues). In addition, all linked projects13 were completed by local funds, complementing the flood protection investments supported by the project. Outcome 2: Improve drainage in selected areas of Laibin City

35. This outcome was measured by PO-2: Urban area serviced by exclusive and improved drainage system (original target 3 km2; no revised target); IRI-3: Km of newly constructed drainage pipelines (original target: 26 km; revised target: 12 km; IRI-4: Km of newly constructed sewage pipelines (original

9 Calculated based on the reduced flood area, simulated by the flood model before and after the project interventions (including both structural and nonstructural measures). 10 This refers to beneficiaries directly prone to serious flood risks in the city while IRI-5 beneficiaries refer to a living area that the people benefit from improved drainage/sanitation facilities. 11 The FWS and FEP were tested, appraised, and accepted by the provincial flood management authority. They were integrated in the city’s flood management system and procedures. Information was provided to the public of their key features. 12 The embankment designs (locations) were optimized, leading to improved results in spite of their reduced length. (As customary, project preparation did not include detailed engineering design.) 13 Flood control investments financed by the project along the Hongshui River and its tributaries are integrally linked to the Guangxi Qianxun River Basin Flood Management Program, hence the term ‘linked projects’ in reference to locally financed investments. These are (a) 6.316 km of dikes along west Beizhijiang River; (b) 4.336 km of dikes along east II part of Beizhijiang River and two along the Hongshui River; (c) 5.79 km of dikes between Xigualing to Xiangyang Road (Xigualing to Shizhengqu Pump Station); and (d) 1.584 km of dikes between Xiangyang Road to Xianggui Railway (Laibin No. 1 Bridge to Xiangyang Pump Station).

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The World Bank Guangxi Laibin Water Environment Project (P126817)

target: 21 km; revised target: 15 km); IRI-5: People (male/female) benefitting from improved drainage/sanitation facilities (original target: 282,000 14 (50 percent women); revised target: 127,500 persons (48 percent women).

36. The project significantly improved the drainage in selected areas of Laibin City. The above indicators are appropriate to measure improved drainage capacity. The original target for beneficiaries in the project area was miscalculated and was corrected with the restructuring. Although less pipelines were laid than originally planned, the actual area was enlarged due to prioritization of the hot spots flooded during the annual rainy season. More pipelines financed by local projects were laid adjacent to the project roads compared to the target after restructuring though. At closing, the urban area serviced by exclusive and improved drainage system was 4.17 km2, exceeding the target, and 127,500 persons (48 percent women) benefitted from improved drainage/sanitation facilities constructed by the project.

37. Based on these targets, this outcome was substantially achieved compared to the original targets, and fully achieved compared to the revised targets, with results as shown above. The project supported these results by financing (a) 12.2 km of new drainage pipelines and (b) 16.2 km of new sewage pipelines. In addition, relevant achievements related to this outcome and not measured by the RF are (a) separation of the drainage and sewer pipeline networks in the project area (previously, the area had combined sewer and drainage networks);15 (b) TA and capacity building on drainage management to departments of the LMG responsible for O&M (see also Section II.E. Institutional Strengthening); and (c) development of O&M plans for all these investments and transfer of O&M responsibilities to responsible agencies (see also Section II.C).

Table 2. Project Outcomes as Measured by PDO-Level Indicators PO-1: Percentage of PO-2: Urban area serviced by PO-3: Direct beneficiaries of population within existing exclusive and improved the project, with percentage urban area vulnerable to drainage system of women 1-in-50-year river floods Original target 234,000 persons 10% 3 km2 (PAD) (50% women) Target (after 199,600 persons 23% 3 km2 restructurings) (48% women) 199,600 persons Actual 23% 4.17 km2a (48% women) Completion 86% of original target/ 86% of original target/ 139% Rate 100% of revised target 100% of revised target Source: Borrower’s Implementation Completion and Results Report, December 2019. Note: a. Although less pipelines were laid than originally planned, the actual area was enlarged due to prioritization of the hot spots flooded during the annual rainy season. More pipelines were laid adjacent to the project roads compared to the target after restructuring.

14 The original target was miscalculated and was corrected with the restructuring. 15 Combined sewers can cause serious water pollution problems during combined sewer overflow events. The benefit of separating sewage from drainage collection systems is that it can reduce treatment and O&M costs at the receiving treatment plant by potentially eliminating storm water flows to the plant. Energy costs for transporting flows to the treatment plant could also be reduced due to the reduced flow volume.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Table 3. Project Outputs as Measured by Intermediate Results Indicators Component I: Component II : Component III: Flood Risk Management Urban Drainage Improvement TA and Capacity Building; Component IV: Project Management and Implementation Support16 IRI-1: Length IRI-2: Total IRI-3: Km of IRI-4: Km of IRI-5: People IRI-7: IRI-8: of area newly newly (male/female) Completion No. of embankment subject to constructed constructed benefitting from status of staff s and slopes inundation drainage sewage improved flood who strengthened by 1-in-50- pipelines pipelines drainage/sanitatio hazard & attends year river n facilities risk maps training floods for the city & study tours Original target 282,000 persons Maps 11.6 km 5 km2 26 km 21 km 300 (PAD) (50% women) complete Target (after 127,500 persons Maps 4.5 km 8.21 km2 12 km 15 km 300 restructuring) (48% women) complete 127,500 Actual 4.5 km 8.21 km2 12.2 km 16.2 km Yes 328 (48% women) 39% of 87% of 46% of 71% of original original 71% of original original/ original/ Completion target/ target/ target/ 102% of 108% of 100% 109% Rate 100% of 100% of 100% of revised revised revised revised revised target target target target target Source: Borrower’s Implementation Completion and Results Report, December 2019.

Justification of Overall Efficacy Rating Rating: Substantial

38. The overall Substantial rating is based on a Substantial and High level of achievement of the first outcome before and after the restructurings, respectively, and a Substantial and High level of achievement of the second outcome before and after the restructurings, respectively, as measured by the PDO-level indicators and IRIs. 39. By project closing, the targets of the PDO-level indicators and IRIs set at the second restructuring were all met or exceeded. The PDO was met with the construction and operation of dikes and the separation of sewer and drain systems, which reduced flood risks, and improved drainage in selected areas of Laibin City, thus contributing to enhanced living conditions and quality of life of Laibin residents (see annex 4). 40. The project directly improved the living standard of 199,600 people (48 percent female) in Laibin, through reduced flood risks, and improved sewerage and drainage systems, which is equal to the expected

16 IRI-6: Preparation of Asset Management Plan by the Laibin Water Investment Company (target: final plan in place) was dropped due to reason explained above in para 25.

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number of direct project beneficiaries and rate of female participation after the second project restructuring.

C. EFFICIENCY Assessment of Efficiency and Rating Rating: Modest

41. Economic analysis. The investments were cost-effective and generated economic benefits that outweighed the capital costs. Although the project closing date was extended by 12 months, this allowed (a) completion of all contracts in the procurement plan and (b) testing and implementation of the FWS and FEP, resulting in enhanced outcomes through better flood risk management. The economic benefits identified at project appraisal remain unchanged and are avoided flood damage, improved water quality and health, and a higher quality of life in the project areas owing to environmental and amenity improvements. A cost-benefit analysis was conducted at appraisal with an economic internal rate of return (EIRR) of 14.5 percent. Applying the same valuation approach, including using the same unit values assumed at appraisal for valuing avoided flood damages and environmental and amenity improvements (derived from assumptions of the increase in land and real property values), the EIRR at completion would be 8.9 percent. However, appropriately using adjusted values, it is 13.7 percent, as explained below. 42. The 8.9 percent EIRR would still be acceptable although it represents a significant drop from the appraisal estimate. The lower EIRR is mainly due to the lower project outcomes (such as the project’s beneficiary population) than expected and reduced area size after project restructuring. However, since appraisal the economic growth and higher living standard in Laibin have increased the value of land and property, which increase the economic value of flood control and other improvements to the quality of life of residents at a rate higher than what was assumed at appraisal. Therefore, the economic analysis at completion made necessary adjustments to the unit value when estimating flood control benefits and other non-flood control environmental and living improvement benefits. As a result, the EIRR at completion becomes 13.7 percent and the benefit-cost ratio is 1.18 (acceptable since it is greater than 1, albeit lower than the 1.39 at appraisal). A sensitivity analysis was conducted to further test the robustness of the analysis. Assuming a 10 percent increase in capital costs and a 10 percent decrease in claimed economic benefits, the EIRR dropped to 7.3 percent. Details on project benefits and the results of the economic analysis are available in annex 4. 43. Financial analysis. As the LMG shouldered the project investment costs and was responsible for loan repayment, no financial internal rate of return calculation was done. The on-budget financial resources and local tax revenues including wastewater tariff were assessed. The city is levying and collecting wastewater tariff from users and the tariffs are adjusted periodically by the LMG.17 O&M action plans for the created assets were adopted by the city and informed the budget allocations. It was concluded that the LMG has sufficient financial ability to repay the debt, and the O&M expenditures for the created assets can be secured through annual budget allocations.

17 Wastewater tariffs are collected together with the water tariff. Current wastewater tariffs were set by the Laibin Price Bureau from January 1, 2017. For residential users, the tariff is RMB 1.05 per m3, but the tariff is only RMB 0.53 per m3 for families who receive basic living allowances. For industrial and public users, the tariff is RMB 1.40 per m3 but only RMB 1.05 per m3 for schools and hospitals.

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44. Implementation efficiency. Project management and supervision, which accounted for US$1.3 million or 1.6 percent of the IBRD loan at appraisal, was maintained at this low rate, corresponding to 2 percent of the IBRD loan despite the US$14 million cancellation and closing date extension. This low rate of administrative costs was made possible since the expenses of the PMO and Project Implementation Unit (PIU), specifically salaries and offices, were paid by the Government. The actual costs of most contracts were significantly lower than the estimated costs at project appraisal, reflecting a competitive environment in the construction sector in China. On the other hand, the project experienced a fairly high staff turnover rate, resulting in delayed implementation due to staff’s learning curves. 45. As per the project’s feasibility study report, the borrower’s planned project management cost was RMB 4.46 million (US$0.64 million equivalent). The recorded actual such expenditures (paid for by the Government, but not as project counterpart funds) were RMB 1.05 million (RMB 0.94 million for the PMO and RMB 0.11 million for the LWIC). The large difference (RMB 3.41 million) is mainly because some staff salaries are not included in the actual costs (many were part-time staff from various departments of the LMG (see annex 3). The efficiency rating is assessed as Modest rather than Substantial mainly due to the procurement issue described in paragraph 72. D. JUSTIFICATION OF OVERALL OUTCOME RATING Rating: Moderately Satisfactory

46. The overall outcome rating considers the High relevance of the project’s objective to national and World Bank priorities at closing, the Substantial efficacy of the project as measured by the original and revised indicators, and the Modest efficiency of the project. 47. Table 4 presents the split rating in accordance with the Implementation Completion and Results Report (ICR) Guidelines. Table 4. Application of Split Rating Original Outcome First Second Row Targets Restructuring Restructuring 1 Relevance of PDO High 2 Efficacy (PDO) Substantial Substantial High Outcome 1: Reduce flood risks in Modest Modest High 3 selected areas of Laibin City Outcome 2: Improve drainage in High High High 4 selected areas of Laibin City Efficiency Modest Moderately Moderately Moderately 5 Outcome Ratings Satisfactory Satisfactory Satisfactory Numerical value of outcome 6 4 4 4 ratings 7 Disbursement (US$, millions) 27.74 11.53 23.49 8 Share of disbursement (%) 44.20 18.37 37.43 Weighted value of the outcome 9 1.77 0.73 1.50 rating (row 6 x row 8) 10 Final outcome rating (1.77+0.73+1.50=4.00) Moderately Satisfactory Note:Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4); Satisfactory (5); Highly Satisfactory (6)

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The World Bank Guangxi Laibin Water Environment Project (P126817)

E. OTHER OUTCOMES AND IMPACTS

Gender

48. The project did not support gender-specific themes; however, it adopted a gender-balanced approach with full participation of women in project-financed activities. Direct beneficiaries’ data were disaggregated by gender, showing an achievement of the 48 percent target. Many female residents in the project area who manage their households benefitted substantially from the lower flood risk and improved drainage facilities. Project-supported improvements of the sewerage service are also expected to benefit women more than men in terms of time saved for traditionally women-managed tasks, such as cooking and childcare.

Institutional Strengthening

49. The flood hazard and risk maps and the related emergency warning system, including FWS, FEP, and hydrological simulation models with extensive data collection, all nonstructural elements supported under Component 3, increased the capacity of several city entities in preventing and responding to floods, minimizing flood hazards. These entities are the Laibin Municipal Hydrological Center, Municipal Water Conservancy Bureau, Municipal Environmental Protection Bureau, City Flood Control Office, Development and Reform Commission, and so on. Staff of the LWIC and the PMO, which was composed of representatives of various LMG departments and agencies, gained capacity for future development projects through study tours and formal and on-the job training on subjects such as O&M, M&E, flood risk management, project management, FM, safeguards, procurement, and dissemination of flood information to both authorities and the public. This will be useful for the cities’ continued urban environmental improvement initiatives.

Mobilizing Private Sector Financing

Not applicable

Poverty Reduction and Shared Prosperity

50. The project supported some of the poorest communities in the city. Without the project, land and houses in the project area would have continued to be seriously damaged by floods and waterlogging. In addition, the price of peoples’ land and houses in the area has increased (actual transaction prices of representative land parcels or houses were used to estimate the price changes), in part due to the reduced flood risks and improved drainage and sewage systems owing to project investments. Through the implementation of social safeguards measures, namely replacement apartments with tenure security, vocational training, and social pensions, living conditions of project affected persons (PAPs) were substantially improved, and their incomes were substantially increased. See an evaluation of social safeguards in section IV.B.

Other Unintended Outcomes and Impacts

Not applicable

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The World Bank Guangxi Laibin Water Environment Project (P126817)

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

51. Soundness of background analysis. The World Bank team conducted a comprehensive review of the relevant government plans and policies, as well as sectoral reports and projects. Project activities were assessed from technical, financial, environmental, social, and institutional perspectives before they were included in the design. The municipality’s fiscal situation was carefully assessed to reduce a risk of a lack of counterpart funds for the project.

52. Reflection on lessons learned and best practices. Lessons learned from other World Bank projects in the Guangxi Autonomous Region’s urban sector and from similar World Bank-financed projects in China, as well as international best practices for reducing flooding risk and improving drainage, were incorporated into the design of the project. A key lesson was on the importance of introducing integrated flood risk management in cities through paying equal attention to structural measures (physical construction) and nonstructural measures, such as tools and practices, training, and improved public awareness, to reduce flood risks and impacts. Beyond the physical constructions, the following particularly innovative components were integrated into the design of the project accordingly: (a) an FWS designed to collect, process, analyze, and disseminate flood-related hydrologic information—in real time—to provide accurate advance warning of an impending flood. Advanced Geographic Information System (GIS)-based modelling and transmission of flood information to all relevant authorities and the public was included; (b) an FEP with flood preparedness, dike safety monitoring, public awareness, and education programs for flood control, integrated with the FWS; and (c) LID approach to urban storm water management as a small pilot to reduce flood peaks, runoff volumes, and pollutant loading by mimicking the pre-development hydrologic setting of a given area. However, the LID pilot was not implemented due to a national sponge city program being under way in China at the time.

53. Appropriateness of project design. The project design was simple and technically sound with focused and well-defined components, logically linked to achieve the PDO. It addressed key challenges of flood risks and water pollution in the city, and the weak capacity of local stakeholders. The PDO statement was clear and relevant to the national, local, and World Bank stated development priorities. Project activities were carefully chosen according to a set of criteria, ensuring that all asset investments financed by the project were ‘priority’ investments for the city. ‘Structural’ and ‘nonstructural’ interventions were balanced, and the preparation and appraisal of technical aspects were conducted using domestic and international good practices. Appropriate implementation arrangements and risk mitigation measures created a good foundation for project implementation. The RF included clear and generally adequate outcome and intermediate indicators which correlated to the two project outcomes. However, specific indicators and annual targets were not defined in the RF for the institutional strengthening and training result.

54. Assessment of risks. The overall risk rating at appraisal was assessed as ‘Substantial’. The risks were correctly identified with appropriate mitigation measures, including optimized engineering to reduce design risks; minimized resettlement to reduce counterpart financing risks; and training, workshops, and project TA to address the limited technical and project management capacity of the PMO and PIU; and an Operational Manual to mitigate governance risks. The main exception was the significant increase in resettlement compensations—mainly due to regulatory changes of compensation levels—and

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related challenges for the LMG to mobilize counterpart funds in a timely manner. This risk was not identified.

55. Preparation of safeguards, financial management, and procurement instruments. Environmental and social safeguard instruments were prepared and published as needed, and procurement and FM assessments were carried out at appraisal.

56. Appropriateness of financing instrument. The Specific Investment Loan (SIL, today known as Investment Project Financing, IPF) was an appropriate financing instrument for the project due to the well-defined interventions.

57. Readiness for implementation. The preparation of the project took 12 months from the concept review to Board approval. This was lower than average for the World Bank’s lending projects in China. A condition of effectiveness was for the Laibin Municipality to relend, through a subsidiary loan agreement, the proceeds of the loan to the LWIC for it to carry out the project as the PIU. This condition was met without delays.

B. KEY FACTORS DURING IMPLEMENTATION

Factors Subject to Government and/or Implementing Entities’ Control

58. Start-up delays. A delay of several months occurred in early project implementation due to (a) lack of experience of the PMO and PIU with World Bank procurement policies and procedures; (b) longer than expected time needed to acquire land for several facilities (for example, pumping stations); and (c) change or unavailability of detailed designs, since the design institutes were not available in a timely manner. This resulted in corresponding delayed procurements, disbursements, and implementation of the related investments, reflected in the low disbursement rate during the initial years (for example, only 9 percent in early 2016). As the project implementation progressed, significant improvements in this regard occurred with corresponding accelerated results achievements.

59. Change of the Laibin City Master Plan. Unprecedented rapid urban growth at the onset of implementation resulted in substantial amendments to the local master plan in 2017 by the LMG to accommodate a new development scheme in the city. Changes were also incorporated to allow the city to host the Guangxi Horticulture Expo 2019. This resulted in an amendment to the land use plan in the project area of the Longdong River, which required a reduction in the project’s scope (carried out as part of the January 2019 restructuring). Thus, the original targets for the project’s beneficiary population and areas subject to inundation by 1-in-50-year river floods were adjusted to reflect the cancellation of the Longdong river flood management subcomponent.

60. High land acquisition and resettlement costs. Underestimated resettlement volumes at appraisal, start-up delays as mentioned earlier, and raised compensation standards by new local regulations of 2017 (for land acquisition, building replacement cost, and other compensation standards) resulted in significantly higher land acquisition and resettlement costs than those specified in the original Resettlement Action Plan (RAP). These caused delays to the mobilization of counterpart funds by the LMG, with resulting delayed implementation.

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Factors Subject to World Bank control

61. A midterm review was conducted in May 2016, resulting in a decision to restructure the project for the first time. To adjust the project to an optimized embankment design and to alleviate counterpart funding issues, the RF was significantly adjusted, disbursement arrangements revised, and a PDO indicator added. Although procurement activities subsequently accelerated, progress toward the PDO and related construction and disbursements were still slow compared to the revised projections at the restructuring, mainly due to land acquisition issues and ongoing revision of the master plan. The project was downgraded to Moderately Unsatisfactory in mid-2018. Following the master plan and land use change by the LMG with its project impacts, and implementation delays of linked activities along the two major rivers in the project area, a second restructuring was approved in January 2019 by the World Bank. Project progress and disbursements improved significantly, and all the project activities were completed before the project closure on January 31, 2020.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E) Rating: Substantial

M&E Design

62. A logical, comprehensive RF with realistic targets was designed at appraisal to monitor the project progress toward achieving the PDO. The design of the RF, sources of data, and definitions of indicators were agreed with the Laibin PMO and presented clearly in the RF. The baseline data were established in 2013 as part of project preparation by the Laibin PMO and were verified by the World Bank task team. However, for several targets the calculation methods and data sources were not specified in supporting documents to the PAD. The RF was strengthened through the two project restructurings, especially the addition of the PDO-level indicator on direct beneficiaries, which added a perspective on the project’s reach to communities and other beneficiaries.

M&E Implementation

63. Data for results monitoring were collected by the implementing agencies as designed. The Laibin PMO, with support from a project management consultant, consolidated all the data and reported in a comprehensive and timely manner through semiannual project progress reports. The reports showed progress of civil works, consulting services, and results as measured by all the project indicators. Progress on institutional strengthening and training was also updated periodically in the semiannual project progress reports; however, without clearly defined indicators, it was not systematically monitored. The progress reports were complemented by adequate and timely monitoring reports from external (third party) agencies on the implementation of the Environmental Management Plan (EMP) and RAPs. The flood hazard and risks maps developed under the project strengthened the M&E processes during the latter part of project implementation, helping to highlight the contributions of project investments to flood mitigation and the drainage system and inform the O&M plans of project-financed assets.

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M&E Utilization

64. Monthly meetings of the PIU and the PMO (which included representatives from all relevant municipal departments) reviewed collected data. The data enabled the World Bank task team and the PMO to monitor progress, identify bottlenecks, and facilitate decision-making or proactive actions, such as increasing supervision frequency, having meetings with senior government officials, and making changes through restructurings. Moreover, the implementation of this quantitative M&E system was a good learning experience and a capacity-building factor for the local government. Extensive environmental monitoring data were shared with contractors to highlight contract compliance (or the lack thereof) and with the PMO and PIU for their ongoing project management.

Justification of Overall Rating of Quality of M&E

65. The Substantial rating considers the sound design of the M&E system (albeit several weaknesses as noted), the strong ownership of the client over collection of data and reporting throughout project implementation, and the effective use of the M&E data, reflected in the many changes made during project implementation.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

66. Environmental safeguards. The project complied with all applicable environmental policies. The project triggered the Environmental Assessment policy (OP 4.01) with a Category B (Partial Assessment) as the principal negative environmental impacts were construction-related temporary, site-specific, and not significant impacts. During project preparation, the borrower prepared an Environmental Impact Assessment (EIA), in accordance with safeguard policies and Chinese national laws and regulations, and a standalone EMP to specify mitigation measures, monitoring plans, institutional arrangements, capacity building, and an estimated budget for the EMP implementation. The Environmental Assessment and the EMP were disclosed on October 25, 2012, in the local newspaper Laibin Daily, and on October 30, 2012, on the Laibin Government website (www.laibin.gov.cn) and on the World Bank website. An environmental management system was established in Laibin City, consisting of staff in the PMO, PIUs, contractors, supervision engineers, and independent external environmental monitoring agencies. During implementation, the project’s environmental performance was monitored and reviewed by both the PMO and third-party monitoring agencies. The EMP implementation was generally satisfactory with particular attention paid to the safe disposal of the Caoxiegou dredged sediments. The project resulted in many environmental benefits owing to the reduction of flood and inundation risks and water pollution in selected areas of Laibin City.

67. Social safeguards. The project complied with all social safeguards policies. The project triggered the Involuntary Resettlement Policy (OP/BP 4.11) due to significant land acquisition and involuntary resettlement. The project involved acquisition of 48.02 ha of land, including 15.35 ha of state-owned land and 32.67 ha of collectively owned rural land. Acquisition of state-owned land affected 11 enterprises and 63,953 m2 of structures were demolished, the vast majority of which were vacant workshops. The land acquisition in rural areas economically displaced 215 households (1,075 persons) and physically displaced 416 families (2,363 persons), with 87,500 m2 of residential housing demolished. The actual resettlement cost was RMB 172.66 million (US$24.88 million equivalent), more than thrice the estimate at appraisal (RMB 54.65 million). Resettlement funds were paid to PAPs on time from the annual fiscal budget.

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68. Overall, the resettlement was implemented satisfactorily in full consultation with the PAPs. The affected land and properties were surveyed and evaluated with the effective participation of PAPs, and the borrower provided adequate public information on resettlement compensation. Resettlement, land acquisition, and demolishing information were disclosed, and public consultations were held throughout implementation. Besides adequate compensation (in cash and in-kind), the project carried out various measures (for example, vocational training, minor credit, social pensions) to enhance the PAPs’ livelihoods. The upward adjustment of the resettlement standards reflected prevailing market values of the affected properties. The project provided PAPs with replacement apartments with tenure security instead of cash compensation. As a result, the PAPs’ living conditions were much improved in a sustainable way, and their economic incomes are expected to have increased substantially.

69. The reports of the external monitoring and evaluation agency concluded that the project legally completed the land acquisition and relocation and materially achieved the objectives set out in the RAPs. The project generated important experience for managing urban resettlement in Laibin City and beyond. Table 5 provides a comparison of planned and actual land acquisition, house demolition, and PAP numbers.

Table 5. Comparison of Land Acquisition, House Demolition, and PAP Planned Actual Categories Unit Affected Affected Area No. of PAPs Area No. of PAPs Households Households Permanent land acquisition Mua 359.31 226 826 720.35 215 1,075 Temporary land occupation m2 192.07 37 151 35.45 19 83 Demolition of rural m2 36,097.3 93 339 87,500 416 2,363 residential houses Demolition of rural attached m2 3,176 0 0 6,762 0 0 houses Demolition of enterprises m2 1,130 0 0 63,953 11 0 Total 356 1,316 661 3,521 Total cost RMB 54.65 million RMB 172.66 million Source: Borrower’s and the external monitoring agency’s reports. Note: a. Mu is the Chinese area unit. One mu is approximately 666.7 m2.

70. Grievance redress. The project established an adequate grievance redress mechanism (GRM) to receive, respond to, and resolve grievances. No complaint was recorded during implementation and there were no outstanding grievances associated with project resettlement at project closing.

71. Procurement. The overall procurement performance during implementation was rated Moderately Satisfactory. The procurement plan remained stable throughout the project implementation. A total of 15 contracts were procured (8 civil works contracts, 4 goods contracts, and 3 consulting service contracts). All civil works and goods contracts were procured using National Competitive Bidding (NCB). Two consulting service contracts used the Quality- and Cost-Based Selection (QCBS) method and one consulting service contract used the Selection Based on the Consultants’ Qualifications (CQS) method. Of the 15 contracts, 10 were subject to prior review and 5 were post reviewed.

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72. Procurement was generally carried out in accordance with the World Bank’s procurement procedures and the agreed procurement plans. However, the domestic anti-corruption authority identified that there were serious fraud and corrupt practices involving PMO officials and implementing agencies’ staff (who were prosecuted in the criminal courts for fraud and corruption in 2017) in procuring five civil works contracts signed between 2014 and 2016. The LMG did not promptly inform the World Bank of the situation and did not take appropriate action against the contractors in accordance with the conditions of contract(s). Following an investigation by the World Bank’s Integrity Vice Presidency (INT) department in 2019, clarification from the borrower, and considering the works for these contracts were substantially complete as of the closing date of the project, the World Bank declared procurement noncompliance against these contracts in a letter dated March 12, 2020. Following this letter, the LMG agreed they would not seek payment of any unclaimed or outstanding amount under these contracts from the World Bank.

73. Financial management. The FM policies and procedures were substantially complied with albeit the above-mentioned procurement noncompliance issue. The project’s FM performance was moderately satisfactory throughout implementation with the key issues noted as (a) delayed mobilization of counterpart funds; (b) ineligible expenditures associated with World Bank-financed contracts (ultimately refunded to the World Bank); (c) unsystematic project filing and/or inadequate documents maintenance; (d) delayed establishment of a project accounting system; and (e) slow disbursement. These deficiencies were mainly due to the limited experience of the borrower with World Bank FM policies and procedures. The FM legal covenants were complied with, and external project audits were furnished on time to the World Bank with acceptable quality and unmodified (clear) audit opinions. Most of the interim unaudited financial reports (IUFRs) were submitted in a timely manner and only three were slightly delayed during the early project implementation years. Periodically, the World Bank provided FM related on-the-job training and implementation support to relevant project staff, which progressively helped improve FM performance.

74. Legal covenants. All covenants in the Loan and Project Agreements were complied with in a timely fashion.

C. BANK PERFORMANCE Rating: Satisfactory

Quality at Entry

75. During project preparation, the World Bank mobilized a task team with a comprehensive mix of expertise, including flood risk management, water resource management, civil engineering, wastewater management, economic and financial expertise, and social and environmental expertise, to assist Laibin in project preparation and to appraise the project. The preparation of the project was built on a sound foundation of both analysis and planning and reflected lessons learned appropriately. The project addressed key challenges well and proposed appropriate designs to reduce flood risks and improve the drainage in Laibin City. The project design was simple with prioritized investments, balancing structural and nonstructural interventions, and with appropriate implementation, safeguards, fiduciary, and risk mitigation arrangements. Noted weaknesses at entry include (a) an underestimation of the land acquisition and resettlement costs and identification of related risk and (b) the RF design shortcomings.

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Quality of Supervision

76. Implementation support missions were carried out at least twice per year, including high-level discussions, technical work sessions, and field visits. Aide Memoires presented comprehensive and frank evaluation of project performance and dictated elaborated action plans. The task team reviewed on an ongoing basis the project’s implementation progress, quality of works, technical issues, fiduciary compliance, safeguards compliance, and so on and provided guidance constantly throughout the project implementation and offered opportunities for the PMO and PIUs to join procurement training and workshops. The task team provided appropriate support for the adaptation to changing project conditions and resolution of implementation issues (for example, reduction of project scope due to a new city master plan), and two Level 2 restructurings were processed. Adequate transition arrangements to operations were ensured through a dialogue with the client and the development of adequate O&M plans for all project investments. Thorough and candid reporting was done in Implementation Supervision and Results Reports (ISRs) with conservative ratings throughout project implementation. Three different Task Team Leaders (TTLs) were assigned by the World Bank for the project supervision and support. According to the borrower’s report, each change of TTL meant that to a certain extent the implementation rhythm of the project changed. Although the transitions were smooth, stability of the management staff would have improved the project efficiency.

Justification of Overall Rating of Bank Performance

77. The World Bank performance is rated Satisfactory to reflect strong implementation supervision and support and only minor quality at entry shortcomings. As this was the first project funded by an international financial institution in Laibin, the World Bank team invested ample efforts in guiding and supporting the borrower in applying the World Bank’s policies and procedures.

D. RISK TO DEVELOPMENT OUTCOME

78. The LMG has demonstrated its ability to manage the infrastructure created by the project and arranged for adequate transition of O&M responsibilities to various government agencies: (a) regarding the river flood risk reduction facilities, all constructed pumping stations and sluice gates were transferred to the Laibin Water Conservancy Bureau, while the responsibility for all dikes including the works on both sides of the Caoxiegou Canal were handed over to the Laibin Municipal Administration Bureau; (b) the urban drainage facilities were transferred to the Laibin Xingbin District Housing and Urban-Rural Construction Bureau; and (c) the responsibility for the FWS was transferred to the Laibin Water Hydrological Center. The O&M plans in the agencies to which the O&M has been transferred and the tools and systems implemented under the project are imbedded in city administration procedures. The O&M costs will be included in the fiscal budget of Laibin Municipality as all the mentioned organizations are budget entities.

79. On the other hand, a slight downturn in the macroeconomic environment in China would create a challenging fiscal situation for the local government and its already constrained finances. This would affect the development outcome overall, including the budgets of the various government agencies which took over the O&M responsibilities of the assets. However, the drainage and sewer networks’ infrastructure requires relatively low maintenance cost, and the O&M of the sewer system is funded

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through wastewater tariffs, which are subject to periodic revision by the local government. Additionally, given that the project investments are basic infrastructure, which is used continuously, the risk that O&M plans will not be implemented and project investments will not be maintained is considered low.

V. LESSONS AND RECOMMENDATIONS

80. The main lessons learned and recommendations for future projects are the following:

81. Take proactive measures to mitigate risks related to changes of local master plans in cities experiencing rapid urban growth. The city of Laibin experienced unprecedented urban growth after project start-up. This resulted in substantial amendments to the local master plan and land use plans, affecting the project implementation. Measures to consider for such risks include, at the project preparation stage, conducting in-depth review of local plans in the context of local urban growth trends, avoiding to the extent possible project investments in areas subject to potential land use planning changes, or having ambitious urban development schemes. During project implementation, continuous consultation with the local government and local urban planning authorities to inform and support necessary adjustments to project designs and synchronizing project interventions with local plan changes in a timely manner.

82. Estimate land/resettlement complexities and costs realistically, particularly in rapidly urbanizing areas. The land acquisition and resettlement costs in the project were more than thrice the estimate at appraisal, partly due to increased volume and partly due to new compensation standards. Implementation delays occurred due to the challenges that the city had to mobilize needed counterpart funds. Special attention should be paid to the land/resettlement costs in peri-urban areas which are experiencing rapid urban sprawl with rampant construction of private buildings. In addition, try to ensure that project resettlement, if incorporated in a larger local resettlement program (partly occurred in this project), is not unduly reliant on the implementation pace of the larger program.

83. Integrated flood risk management proved effective. The integrated approach applied in the project, which combined structural and nonstructural measures, proved to be effective in the flood risk reduction and flood control in Laibin, a city experiencing rapid urbanization. While the structural measures played a key role in minimizing flood damages, enhancing nonstructural measures for the flood risk management was an important complementing investment and also helped reduce the environmental and social impacts of the project. The flood risk maps and the warning system and related information dissemination to the residents improved the public awareness of flood issues, increased economic benefits, and gave confidence to the local government to change investment patterns.

84. Arrange orientation sessions for bidders on World Bank procurement policy and procedures. Many new bidders in China are not familiar with the tender and contracting processes applied in World Bank-financed projects. Instead, they rely on domestic practices, resulting in unrealistic or unresponsive bids and in time-consuming issue resolutions during construction. Several bids under this project were rejected due to bidders’ unfamiliarity with the requirements, and some implementation delays were caused by contractors not being familiar with processes for variation orders. In addition, although a tender process, including contracting, may be done properly, misprocurement can be due to subsequent improper implementation approach by the contractor and related neglect by a PMO. Broad scope of

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construction supervision is needed, including oversight of contractor adherence to all tender and contracting provisions. Periodic orientation sessions in China on World Bank procurement policy and procedures would be helpful to ensure realistic and responsive bids and smooth contract execution. .

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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS

A.1 PDO Indicators

Objective/Outcome: River Flood Risk Management Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct beneficiary of the Number 0.00 234.00 199.60 199.60 project, with percentage of (Thousand) women 31-Dec-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

with percentage of women Percentage 0.00 48.00 48.00 48.00

Comments (achievements against targets): The original target was reduced from 234,000 to 199,600 due to cancellation of the Longdong river flood management sub-component in the second restructuring. The revised target was achieved.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion

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PO-1: Percentage of Percentage 72.00 10.00 23.00 23.00 population within existing urban area vulnerable to 1-in 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020 50-year river floods

Comments (achievements against targets): The original target was adjusted from 10% to 23% due to cancellation of the Longdong river flood management sub-component in the second restructuring. The revised target was achieved.

Objective/Outcome: Improving Urban Drainage Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PO-2: Urban area serviced by Kilometers 0.00 3.00 4.17 exclusive and improved drainage system. 30-Nov-2012 31-Jan-2019 31-Jan-2020

Comments (achievements against targets): The target was exceeded.

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A.2 Intermediate Results Indicators

Component: River Flood Risk Reduction

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-1:Length of embankments Kilometers 0.00 11.60 4.50 4.63 and slopes strengthened as part of project investments 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

Comments (achievements against targets): The original target was reduced from 11.6 km to 4.5 km due to cancellation of the Longdong river flood management sub-component in the second restructuring. The revised target was exceeded.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-2: Total area subject to Square 30.00 5.00 8.21 8.21 inundation by 1-in-50-year kilometer(km2) river floods 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

Comments (achievements against targets): The original target was adjusted from 5 km2 to 8.21 km2 due to cancellation of the Longdong river flood management sub-component in the second restructuring. The revised target was achieved.

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Component: Improving Urban Drainage

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-3: Km of newly Kilometers 0.00 26.00 12.00 12.18 constructed drainage pipelines 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

Comments (achievements against targets): The original target was revised from 26 km to 12 km to align them with the cancellation of contract in the first restructuring. The target was achieved.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-4: Km of newly Kilometers 0.00 21.00 15.00 16.20 constructed sewage pipelines 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

Comments (achievements against targets): The original target was revised from 21 km to 15 km to align them with the cancellation of contract in the first restructuring. The target was achieved.

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Component: Technical Assistance

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-5: People (male/female) Text 0 282,000 127500 127,500 benefitting from “improved drainage facilities” under the 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020 Project (disaggregated by Gender)

Comments (achievements against targets): The original target was error calculated and rectified in the second restructuring. The target was achieved.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-7: Completion status of Text No maps completed Completed Completed Completed the flood hazard and risk maps for the city 30-Nov-2012 31-Jan-2019 31-Jan-2020 31-Jan-2020

Comments (achievements against targets): The original target was achieved.

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Component: Project Management

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-8: Number of staff from Number 0.00 300.00 328.00 PMO and related bureaus (including decision makers) 30-Nov-2012 31-Jan-2019 31-Jan-2020 who attend trainings and study tours (both domesticand international)

Comments (achievements against targets): The original target was exceeded.

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B. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1: River Flood Risk Management 1. Percentage of population within existing urban area Outcome Indicators vulnerable to 1-in 50-year river floods 1. Length of embankments and slopes strengthened as part of Intermediate Results Indicators project investments 2. Total area subject to inundation by 1-in-50-year river floods 1. Improved flood management strategy and systems capacity established and functioning 2. Flood emergency plan established including dike safety and public awareness Key Outputs by Component 3. Real-time flood warning system established and tested (linked to the achievement of the 4. Flood control facilities established and functioning Objective/Outcome 1) 5. 4.63 km of embankments strengthened (In addition, 18.03 km embankments were strengthened during the project period through related, fully government-funded activities.) 6. Completed flood hazard and risk maps for the city

Objective/Outcome 2: Improving Urban Drainage

1. Urban area serviced by exclusive and improved drainage Outcome Indicators system 1. Km of newly constructed drainage pipelines Intermediate Results Indicators 2. Km of newly constructed sewage pipelines 1. Drainage facilities established and functioning Key Outputs by Component 2. 12.18 km of new drainage pipelines laid (linked to the achievement of the 3. 16.20 km of new sewage pipelines laid Objective/Outcome 2) 4. People (male/female) benefitting from “improved drainage facilities” under the Project (disaggregated by Gender)

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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role Preparation Sing Cho Task Team Leader

Zheng Liu Procurement Specialist

Yi Geng Financial Management Specialist

Yan Zhang Team Assistant

Feng Ji, Aimin Hao Social Development Specialists

Weiling Li Team Assistant

Alejandro Garza Counsel

Supervision/ICR Guangming Yan Task Team Leader Zheng Liu Procurement Specialist Haixia Li Financial Management Specialist Yan Zhang Team Assistant Hongwei Zhao Team Assistant Feng Ji Environmental Specialist Isabel Duarte A. Junior Team Assistant Alejandro Alcala Gerez Counsel Marcus John Jin Sarn Lee Urban Specialist Aimin Hao Social Development Specialist Mats Andersson Consultant for ICR preparation

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B. STAFF TIME AND COST

Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY12 25.603 158,157.30 FY13 19.347 152,125.82

Total 44.95 310,283.12

Supervision/ICR FY12 0 0.00 FY14 12.537 65,548.34 FY15 16.144 64,786.71 FY16 17.313 66,769.46 FY17 12.750 53,559.75 FY18 17.713 100,755.74 FY19 17.025 93,473.68 FY20 20.373 103,883.44 Total 113.86 548,777.12

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ANNEX 3. PROJECT COST BY COMPONENT

Amount at Actual at Project Closing (US$, millions) Percentage Components Approval World Bank Counterpart of Approval

(US$, millions) Financing Financing (%) Component 1: River Flood 58.99 66.01 33.00 33.01 125 Risk Management Component 2: Improving 66.56 47.50 28.32 19.18 76 Urban Drainage Component 3: Technical Assistance and Capacity 0.50 0.82 0.63 0.19 164 Building Component 4: Project Management and 1.30 0.61 0.52 0.09 47 Spervision Total 127.35 114.94 62.47 52.47 99

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ANNEX 4. EFFICIENCY ANALYSIS

1. The PDO was to reduce flood risks and improve drainage in selected areas of Laibin. This was to be achieved through investments in the reduction of river flood risks, improvement of urban drainage, and technical assistance and capacity building. The PDO was not changed since appraisal.

2. While there were no major changes in project activities, some adjustments were made in flood risk reduction investments during a project restructuring. These included (a) cancellation of the Longdong river flood management subcomponent and (b) reduced length of strengthened embankments and slopes. They were due to the Government’s revision of the Laibin City Master Plan and the land-use plan downstream from Longdong River to accommodate new developments.

3. Project restructurings caused some changes in outputs and outcomes. The project’s main beneficiaries were the local residents, both those living in the project area before the project implementation, and newcomers who migrated or were relocated to the area since then. The total beneficiary population at completion is estimated at 199,600, less than the 234,000 projected at project appraisal, due to the dropping of the Longdong river flood risk reduction subcomponent. The target value for PDO indicator ‘Percentage of population within existing urban area vulnerable to 1-in-50-year river floods’ was amended from 10 percent to 23 percent. The area with improved drainage systems reached 4.17 km2 (higher than the target of 3 km2).

4. The project objectives were largely met with the construction and operation of most of the dikes and separate sewer and drain systems, which reduced flood risks, improved drainage in selected areas of Laibin City, and enhanced the living conditions and quality of life for Laibin residents.

5. The types of economic benefits identified at appraisal remained unchanged. The project generated a variety of economic benefits to local residents in Laibin City, especially in the areas along Hongshui River and Beizhijiang River, and in the old town of Laibin City, which in the past was frequently inundated by river floods and storm water backlog. The main benefits included avoided flood damages, improved water quality and health, and a higher quality of life, owing to environmental and amenity improvements in the project area. Benefits were measured by (a) avoided flood damages and (b) other environmental and amenity improvements. The flood control and drainage investments also benefited low-income households in the old quarter of the city.

6. A cost-benefit analysis was conducted during appraisal with an estimated EIRR of 14.5 percent as reported in the PAD. The cost-benefit analysis at completion applied the same method with updated cost and benefit estimations.

7. The project’s total cost consists of capital investment during the construction period and O&M costs during the implementation period. They include the costs of land acquisition and resettlement and environmental and social management. At completion, the actual total capital investment of the project was RMB 78.26 million, only slightly lower than estimated at appraisal, despite the cancellation of several investments. This is because of significantly higher resettlement costs during the project implementation. The annual O&M cost, consisting of labor costs, electricity and fuel costs, equipment and materials costs,

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and annual average maintenance costs as well as environmental and social management costs, is an estimated RMB 11.32 million at completion.

8. The analysis at completion used two sets of assumptions or parameters to calculate the economic benefits and EIRR. The first was to apply the same unit values assumed at appraisal for valuing avoided flood damages and environmental and amenity improvements (derived from assumptions on the increase in land and real property values), which produced an EIRR of 8.9 percent. While this EIRR remains acceptable, it is significantly less than the 14.5 percent EIRR at appraisal. The lower EIRR is mainly due to a decrease in project outcomes such as the project’s beneficiary population and area, only slightly lower total capital investment costs (despite the cancelation of some investments), and significantly higher land acquisition and resettlement costs. The actual unit cost per output at completion is higher than that projected at appraisal, with economic efficiency lower than expected.

9. However, since the 2013 appraisal, Laibin City has experienced rapid economic growth and improved environmental quality and quality of life. The improvements are reflected in the unit value increase of land and property, which further increase the economic benefits of flood control and non- flood control improvements to the quality of life of local residents. Therefore, the analysis at completion employed a second set of parameters or assumptions using updated information and data available at completion to adjust the unit value of land and property in the project area when estimating flood control benefits and other non-flood control environmental and living improvement benefits and then recalculated the EIRR. Estimates of flood control benefits and the additional benefits of environmental and amenity improvements and improved quality of life, along with the updated assumptions and parameters, are presented in the following paragraphs.

Avoided Flood Damages

10. Based on historical data, economic losses by the frequency of floods in Laibin’s urban areas are estimated as in the table 4.1.

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Table 4.1. Estimated Economic Loss by Frequency of Flood in Laibin Urban Areas (Unit: RMB 10,000 in 2007 price) Frequency (%) 2 (1 in 50 years) 5 10 20 50 Item Quantity Loss Quantity Loss Quantity Loss Quantity Loss Quantity Loss 1. Affected area Km2 45.69 23.16 14.55 3.43 1.85 2. Affected 10,000 18.15 7,260.00 8.50 3,400.00 3.80 1,520.00 1.60 640.00 0.03 12.00 population 3. Affected

houses - Brick-concrete 10,000 m2 27.39 547.82 20.02 400.46 10.12 202.32 4.01 80.13 0.16 4.15 structure - Brick-wood 10,000 m2 40.42 1,212.64 29.55 886.46 14.93 447.85 5.91 177.38 0.27 6.91 structure 4. Industrial

losses - Industrial RMB 1,861.15 203.46 1,360.79 118.39 687.49 52.94 272.29 18.24 10.64 0.43 output 10,000 - Net value of RMB 5,052.64 505.27 3,693.59 369.36 1,866.04 186.60 739.07 73.91 28.88 2.89 fixed assets 10,000 5. Agricultural

losses - Paddy field ha 252.63 378.96 184.68 277.02 93.30 139.95 36.95 55.43 1.44 2.17 - Vegetable field ha 121.53 182.30 88.84 133.26 44.88 67.32 17.78 26.66 0.69 1.04 - Fish pond ha 63.82 191.47 46.66 139.97 23.57 70.71 9.34 28.01 0.36 1.08 6. Business

losses RMB - Business profit 2,978.42 325.54 2,177.27 189.42 1,099.90 84.70 435.66 29.19 17.02 0.68 10,000 - Net value of RMB 18,641.70 1,864.20 13,627.30 1,362.70 6,884.70 688.47 2,726.70 272.70 106.54 10.65 fixed assets 10,000 7. Loss of RMB 7,711.97 1,642.39 5,637.70 1,127.52 2,848.20 669.83 1,128.10 225.60 44.08 8.82 inventory 10,000 8. Direct RMB 14,214.00 8,404.60 4,030.50 1,627.20 49.81

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Frequency (%) 2 (1 in 50 years) 5 10 20 50 Item Quantity Loss Quantity Loss Quantity Loss Quantity Loss Quantity Loss economic loss 10,000 RMB 9. Other losses 1,989.90 1,176.60 564.30 227.80 8.98 10,000 10. Indirect RMB 1,776.80 1,050.60 503.80 203.40 6.23 economic losses 10,000 Total economic RMB 17,980.70 10,632.00 5,098.60 2,058.50 63.34 loss 10,000 Source: Statistical Yearbooks of Laibin City and related materials provided by the Laibin City Government.

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11. Before the project, Laibin had no adequate flood control systems in its urban area and the city could not protect the area from floods beyond a frequency of 1 in 10 years. Through the project and other investments funded by the Government, Laibin constructed dikes in the low-lying areas along two main rivers—Hongshui River and Beizhijiang River—running through the city and also constructed sluice gates on the tributaries of these rivers. These investments enabled the city to prevent flooding and water logging during up to 1-in-50-years floods. The average flood control benefit in 2007 prices is RMB 18.44 million. The value converted into 2013 prices (the base year of the project)—using the price index from the Laibin Statistics Yearbook—is RMB 25.46 million.

12. Further considering the economic growth of Laibin (at a conservative annual rate of 6 percent in 2014–2019), the flood control benefit in the first year of operation (2020) is RMB 37.19 million. The flood control benefit will continue to change according to the annual economic growth rate of Laibin which is projected at 6 percent in the first five years, 4 percent from year 6 to 15, and 2 percent thereafter.

13. The flood control benefit is the result of the joint efforts of both the World Bank-financed project and other investments of the Laibin government using its own annual budget for construction and completion of the dikes along rivers and constructing or upgrading drainage systems in the old town of Laibin to prevent water backlog. The value of flood control benefits over the operation period was split among the World Bank and other investments assuming that 60 percent of the avoided flood damages each year is attributed to flood control investment and 40 percent to drainage improvement. Of the 32.6 km length of dikes built to protect the urban area of Laibin, the project financed 4.63 km (or 14 percent), instead of the originally planned 11.4 km. Regarding the total investment addressing water logging in the old part of Laibin City, the project’s share is 89 percent. Therefore, the flood control benefit of the project is estimated at RMB16.25 million in 2020.

Environmental Improvement Benefits

14. The flood management and drainage improvement investments in Laibin City also significantly improved the aesthetic values and sanitation conditions of the areas along the rivers and in the old town and improved amenities and public health for the people who live there. These benefits, however, are not directly translatable to monetary terms. The hedonic approach was used in the analysis, estimating the change in the value of lands and houses affected by the project, and then using this change to approximate the economic benefit of amenity and quality-of-life improvements.

15. Land value increase. Available figures on land value changes during the project’s implementation period were used as reference. The transaction price of a representative land parcel (mostly for residential use) in the nearby riverbank sharply increased from RMB 0.86 million per mu (1 hectare is about 15 mu) before rehabilitation, to RMB 2.50 million per mu, an increase of RMB 1.64 million per mu. The increase in the market value of land is attributable to both flood control and environmental improvements. Since flood protection benefits were determined above, double counting needs to be avoided. Therefore, land values were compared from two adjacent land parcels: one is in a low-lying area under threat from frequent floods; the other is on higher ground and safe from flooding. Their land values are RMB 1.10 million and RMB 2.10 million, respectively, a difference of RMB 1.0 million. The difference can represent the impact of flood protection on the land value. After deducting the flood protection benefits, the land value increase due to other amenity and environmental improvements is estimated at RMB 0.64 per mu.

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16. According to the Laibin City Urban Master Plan, available land for new development in the project area is listed in table 4.2. The total area of this land is 1,513 mu.

Table 4.2. Land Available for Development in the Project Area Available Land No. Project Project Content Benefited Area (mu) Hongshui River (Municipal 1,330 m, dikes, 1 North shore, 500–800 m 200 Drainage - Caoxie Ditch) revetment Hongshui River (Xiangyang Road - 1,760 m, dikes, 2 North shore, 500–800 m 385 Xiang-Gui railway bridge) revetment Beizhijiang River (north of Shuiyun 3 1,540 m, dikes East shore, 300–500 m 668 Drainage) 2,900 m, river 4 Caoxie Ditch Both sides, 100–300 m 260 improvement Total 1,513

17. Deducting the planned area reserved for public uses (that is, main roads, parks, schools, and public transport facilities), the area available for developers is 1,286 mu. From this, the increase in land value, excluding the flood control benefit, is estimated at RMB 823 million. The analysis assumes that all the land will be sold and developed over 15 years, with 50 percent developed in the first five years, 30 percent in the next five years, and 20 percent in the last five years.

18. Estimated benefits of housing price increase. The project also increased property prices in the old town area, which suffers from frequent floods caused by water logging and river flooding. According to survey data provided by the Laibin government, the estimated floor area of houses benefitting from the project is 171,700 m2 (this includes permanent brick structure houses only). The house price in low- lying areas frequently threatened by water logging is RMB 2,500 per m2, while the price for housing in higher areas safe from water logging problems is in the range of RMB 4,400 per m2. The conservative low- end difference of RMB 1,900 per m2 was used.

19. The housing price increase is attributable to two sources: (a) avoided damages from river flooding (already considered in the first part of the estimated economic benefits) and (b) broader improvements in environmental and amenity values. To avoid double counting, the benefit of avoided flood damage to the houses (RMB 200 per m2) was deducted from the unit housing price increase. The total benefits were estimated at about RMB 291.9 million, which were counted in the benefit stream of the first two years. At the end of the project life, the dikes and drainage system built by the project will remain functional. Their continuous economic contribution after the project’s life was simply estimated as the residual value of the assets.

Overall Evaluation and Sensitivity Analysis

20. The economic analysis results are shown in table 4.3. The EIRR at completion is 13.65 percent (lower than the 14.50 percent at the project appraisal) and the benefit-cost ratio is 1.18 (lower than the 1.39 at appraisal). A sensitivity analysis was conducted to test the robustness of the analysis. Under the assumptions of a 10 percent increase in capital costs and a 10 percent decrease in claimed economic benefits, the EIRR dropped to 7.3 percent.

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21. The conclusion is that the project’s economic objectives have overall been achieved, with a Modest efficiency rating.

Table 4.3 Economic Analysis Results

Unit: 10,000 RMB Items 2014 2015 2016 2017 2018 2019 2020 2025 2030 2040 2050 2060 2069 Economic Benefits

Avoided flood damages 1110.0 1474.0 1548.0 1625.4 2054.8 2499.9 3293.5 4014.8 4894.0 5848.8

Other environmental and amenity improvement benefits

- Increased land value 8230.4 8230.4 8230.4 4938.2 3292.2

- Increased property value 14594.5 14594.5

Residual capital value 39113.0

Subtotal 1110.0 24298.9 24372.9 9855.8 6993.0 5792.1 3293.5 4014.8 4894.0 44961.8 Economic Costs Capital investment 1602.1 2863.7 13127.0 15668.0 14236.1 30729.1 O&M Cost 1131.7 1311.9 1520.9 2043.9 2746.9 3691.6 4816.7 Subtotal 1602.1 2863.7 13127.0 15668.0 14236.1 30729.1 1244.8 1311.9 1520.9 2043.9 2746.9 3691.6 5298.3 Net Benefit -1602.1 -2863.7 -13127.0 -14558.0 10062.8 -6356.2 8611.0 5681.1 4271.2 1249.6 1267.9 1202.4 39663.5 EIRR 13.65% NPV 12003.5 Benefit-cost ratio 1.18

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ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

1. The only comments received from the borrower on the World Bank’s ICR were minor corrections of figures. Instead, this annex provides a brief summary of key observations, lessons learned, and recommendations in the borrower’s completion report (106 pages), December 2020. The full report is available in WBDocs.

Project Context, Objectives, and Design

2. Laibin City was formally established in 2002 and is located in the central part of Guangxi Zhuangzu Autonomous Region (‘Guangxi’) in southern China. Several important rivers flow through Laibin City: the Hongshui River and its main tributaries Longdong River, Beizhijiang River, and Caoxiegou Stream. Like every small city in China, Laibin City has been experiencing rapid urbanization since its establishment. Its population increased from 120,000 in 2002 to 260,000 in 2010. The city’s Master Plan for 2008–2025 projects that Laibin’s population will more than double to 600,000 by 2025.

3. The uneven rainfall schedule, large evaporation, and thin soil conditions in Laibin City not only bring great pressure to Laibin City's water supply but also easily cause floods in newly developed areas and the old urban area along the rivers, particularly from June to August. The existing storm drainage and flood control systems suffer from inadequate engineering, incomplete works, lack of maintenance, and deficient waste management. The sewerage system is often blocked due to lack of maintenance. Laibin City is also facing serious problems with surface water pollution; most of the domestic wastewater that is collected is directly discharged into Hongshui River without proper treatment. To address the increasing pressure on its urban environment, the Laibin City Government requested the World Bank’s support to finance some priority investments related to the Urban Master Plan and Flood and Drainage Plan.

Project Development Objective

4. The PDO is to reduce flood risks and improve drainage in selected areas of Laibin City.

Project Beneficiaries

5. The total direct beneficiaries at appraisal were expected to be 234,000. However, due to the change of project scope at second restructuring, the number of project beneficiaries was adjusted to 199,600. In addition, the relevant government agencies such as Laibin Municipal Hydrographic Bureau, the Laibin Municipal Water Conservancy Bureau, the Laibin Municipal Environmental Protection Bureau, the Laibin City Flood Control Office, and the district- and county-level flood control offices benefited from the strengthened capacity in integrated flood risk management, capital investment planning, and asset management.

Project Restructuring

6. Restructuring: June 1, 2017. As a result of embankment design optimization, low price of bids, cancellation of one sewerage and drainage contract, and foreign currency exchange rate variation, US$10 million of loan savings was expected. To enable full utilization of the loan proceeds, changes made at the restructuring were (a) increase of disbursement percentage of the works and goods category from 84

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percent to 100 percent, (b) cancellation of technical assistance on asset management and capital planning, (c) revision of targets for some indicators, and (d) addition of a beneficiary indicator to capture overall project results.

7. Restructuring: January 2, 2019. In 2018, the LMG revised its master plan and amended a land-use plan downstream of Longdong River to accommodate new developments, especially for a Guangxi Horticulture Expo 2019. The flood management plan and technical designs were revised to align with the new master plan. Therefore, Subcomponent 1.3 (Longdong River Flood Management: rehabilitation and strengthening of 6.3 km of dikes, a pump station, and a sluice gate) was dropped from the project. Changes made at the restructuring were (a) cancellation of the Longdong river flood management subcomponent under Component 1; (b) loan cancellation of US$14 million allocated under the category ‘Works and Goods’; (c) extension of the loan closing date by 12 months to January 31, 2020; (d) and adjustments to the Results Framework: (i) the target value for intermediate outcome indicator ‘Length of embankments and slopes strengthened as part of project investments’ was amended from 10 km to 4.5 km and (ii) the target value for intermediate outcome indicator ‘Total area subject to inundation by 1-in- 50-year river floods’ was amended from 5 km2 to 8.21 km2.

8. Quality at entry. The project addressed the priorities of the city’s strategy to protect natural resources and cultural assets, improve the urban environment, and promote sustainable urban and industrial development. The feasibility study for the whole project was carried out by Shanghai Municipal Engineering Design Institute (Group) Co., Ltd. During the design phase, the World Bank mission and the consulting unit discussed the feasibility report and project design several times and shared the best integrated flood risk management and sustainable urban drainage experience. From the technical perspective, project designs are technically sound, represent appropriate cost-effective alternatives, and are based on sound engineering practice. Three important aspects to increase the effectiveness of structural measures were identified and integrated into the project design: (a) a LID application to urban storm water management, (b) an FWS, and (c) an FEP.

Key Factors Affecting Implementation and Outcomes

9. Key factors affecting implementation include (a) unfamiliarity with World Bank procurement procedures by the PMO and PIU; (b) higher than expected land acquisition and resettlement costs which caused project implementation delays as the LMG was not able to mobilize the required funds in a timely manner; and (c) revision to the Laibin Master Plan by the LMG to accommodate new development scheme in the city.

World Bank Performance

10. Ensure project preparation quality: Satisfactory. At the preparation stage, the World Bank assembled a strong team with expertise in technical, environmental, social safeguards, procurement, and financial management. They brought international good practice in water environment management and helped the Laibin PMO identify the needed investments and design the infrastructure in a cost-effective manner.

11. Project supervision quality: Satisfactory. The recommendations made by the World Bank team played a positive role in project implementation, in particular when the project needed major

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adjustments. Leaders of Laibin City at all levels, the PMO, and implementing units expressed their satisfaction with the World Bank's support.

Borrower Performance

12. Borrower performance at the project preparation stage and implementation stage was rated Satisfactory and Moderately Satisfactory, respectively.

Experience and Lessons

13. Keep the team stable. It is more important for the PMO and PIUs to maintain the stability of project staff to ensure the quality of project implementation.

14. Strengthen internal coordination and management. Pay high attention to the project and raise the political importance of the project to effectively enhance the sense of mission and responsibility during the project implementation. The LWIC set up special teams, such as the payment application team, withdrawal team, and technical team, with a clear division of tasks. A project promotion coordination WeChat group was set up to put the issue of the day to the group. After the corruption cases in the project, immediate adjustment to the project management mode was made to strengthen the project management.

15. Enhance service standard of design institutions. It is necessary to strengthen the service standard and responsibility awareness of the design institutes, not only to conduct a good in-depth investigation in the early stage but also to play a guiding role in the construction process and give timely feedback.

16. Enhance bidder’s knowledge on World Bank bidding process. Many bidders do not understand the World Bank project rules when bidding. They rely too much on domestic practices and compete blindly, resulting in low bids. It is recommended to do a good job in pre-bid publicity to ensure that the bidder understands the rules and the actual situation.

Advice and Suggestions to the World Bank

17. To increasing the project effect and benefit more people, the LMG expects World Bank support as follows:

18. Scaling-up of World Bank support. Although the project has achieved substantial results, there are still several areas for improvement. It is hoped that the World Bank can carry out more capacity- building or build bridges for communications with other PMOs, to learn from each other.

19. The World Bank has underestimated China’s urban development speed. China is experiencing an unprecedented urbanization process at an unparalleled speed and scale, including in Laibin. It is hoped that the World Bank can better understand China’s development in the future, which will help it carry out more and better projects in China in the future.

20. The frequent change of the TTL. The World Bank assigned three TTLs to manage the project. Because of their different personalities and experience, each TTL had a unique understanding and focus

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The World Bank Guangxi Laibin Water Environment Project (P126817)

on the project. Therefore, each change of the TTL meant that to a certain extent, the implementation rhythm and concept of the project changed. This affected the speed of the project, and this is not conducive to running the World Bank team and the domestic team. It is hoped that the World Bank will try to maintain the stability of the management staff in the future, which will improve the project efficiency.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

ANNEX 6. SUPPORTING DOCUMENTS

1. Borrower’s Implementation Completion Report, December 2019. 2. The World Bank, Support for Guangxi Laibin Water Environment Project: Project Concept Note, 2012. 3. The World Bank, Support for Guangxi Laibin Water Environment Project: Project Information Document, April 22, 2012. 4. The World Bank, Support for Guangxi Laibin Water Environment Project: Appraisal Document (Report No: 74403-CN), April 29, 2013. 5. The World Bank, Guangxi Laibin Water Environment Project: Loan Agreement (Loan Number 8249- CN) between People’s Republic of China and International Bank for Reconstruction and Development, July 4, 2013. 6. The World Bank, Guangxi Laibin Water Environment Project: Project Agreement (Loan Number 8249- CN) between People’s Republic of China and International Bank for Reconstruction and Development, July 4, 2013. 7. The World Bank, Aide Memoires for the Guangxi Laibin Water Environment Project (Loan Number 8249-CN), from 2013 to 2020. 8. The World Bank, Implementation Supervision Reports (ISRs) as disclosed for the Guangxi Laibin Water Environment Project (Loan Number 8249-CN) from 2013 to 2020. 9. The World Bank, Restructuring Paper on a Proposed Project Restructuring of the Guangxi Laibin Water Environment Project, LN8249-CN (Report No: RES28428) to the People’s Republic of China, June 19, 2017. 10. The World Bank, Restructuring Paper on a Proposed Project Restructuring of the Guangxi Laibin Water Environment Project, LN8249-CN (Report No: RES34991) to the People’s Republic of China, January 15, 2019. 11. Letter of Procurement Noncompliance, March 13, 2020.

Other Supporting Documents

Borrower’s progress reports, audit reports, IUFRs, third-party monitoring reports, safeguards instruments, and summary of stakeholder surveys.

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ANNEX 7. PHOTOS OF PROJECT ACHIEVEMENTS AND PROJECT MAP

Figure 7.1. Caoxiegou Community before and after Project

Caoxiegou Community before project: River of Caoxiegou Caoxiegou Community before project: River of in Laibin old central area polluted with uncollected Caoxiegou in Laibin old central area polluted with wastewater and solid wastes and high flooding risks to the uncollected wastewater and solid waste and high local residents. flooding risks to the local residents.

Caoxiegou Community after project: Local residents Caoxiegou Community after project: Environmental benefit from the changes in the river: increase in changes after wastewater intercepted, riverbed amenities, land and property values, and small businesses dredged, flooding standard upgraded, and landscaping (restaurants, small stores) associated with improved applied under the project. environmental conditions along the river. Source: Borrower’s ICR.

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The World Bank Guangxi Laibin Water Environment Project (P126817)

Figure 7.2. Flood Prevention Dikes

Source: Borrower’s ICR.

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