INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC2531

Public Disclosure Authorized Date ISDS Prepared/Updated: 01/11/2008

I. BASIC INFORMATION

A. Basic Project Data

Country: Project ID: P096812 Project Name: Urban Environmental Project II Task Team Leader: Takuya Kamata Estimated Appraisal Date: December 3, Estimated Board Date: May 27, 2008 2007 Managing Unit: EASUR Lending Instrument: Specific Investment

Public Disclosure Authorized Loan Sector: General water, sanitation and flood protection sector (100%) Theme: Pollution management and environmental health (P);Water resource management (S);Environmental policies and institutions (S) IBRD Amount (US$m.): 150.00 IDA Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: Borrower 150.00 Financing Gap 0.00 150.00 Public Disclosure Authorized

B. Project Objectives [from section 2 of PCN] The development objective of the proposed project is to assist in the fostering of environmentally sustainable economic growth of Yunnan Province by abating environmental degradation of lake basins adjacent to its largest urban centers and by providing urban environmental infrastructure critical for development of county towns.

The Project is not only a financing vehicle for investments, but also a forum for experimenting with innovative approaches. In response to client?s strong interest and demand, works are already underway on the following, while not all of them may be implemented under this project: introduction of ?integrated lake basin management systems? as key pillar of project design (see the section below), issuance of utility corporate bonds ? la APL2, consolidation of Public Disclosure Authorized intra-municipal utilities as an experimental basis, and a pilot TA program on the development of environment compensation market mechanisms for farmers, for which an EASES study is being carried out. Joint Bank/IFC team composition has also been maintained to promote IFC investments and private sector participation. C. Project Description [from section 3 of PCN] The Project would consist of two pillars: i) integrated lake basin management for Dianchi and Er?Hai and ii) urban environmental infrastructure development in about 20 county towns in Municipality, Dali Prefecture, Municipality and Wenshan Prefecture.

Those four municipalities/prefectures are selected out of 16 prefectures by, among others, the following criteria: national and provincial strategic priorities, high degree of pollution, risk mitigation needs (danger of flood etc.), fiscal needs, rapid urbanization around small towns, fast tourism development, and institutional capacity. Subsequently, participating county towns are selected by applying similar criteria. A more detailed description of the selection process is available upon request.

Component I: Integrated Lake Basin Management: The component will support major policy and institutional reforms for Dianchi management systems while enhancing the existing lake basin management programs in Er?Hai. The team intends to part from the approaches adopted in the previous YEP, under which the key objective -- restoration of Dianchi to Class III quality -- was not achieved: it has actually deteriorated from Class IV to Class V. YEP relied heavily on industrial pollution control and urban wastewater treatment. Unappreciated were the needs for: sustained political will, public support and a strong organization to set program goals and priorities; institutional set-up to control/coordinate the implementation of programs over the entire watershed, including all tributaries; a full scientific understanding of causes and effects (lake basin water quality modeling); control of increasing agricultural run-off; and restoration of streambanks and lake shoreline. Through development of ?integrated lake basin management systems (ILBMS)? for Dianchi, as well as through enhancement of the existing systems for Er?Hai, these deficiencies would be addressed.

Since interventions to stem degradation in Dianchi and Er?Hai cannot wait for the development of a comprehensive water quality model, prescriptive and preemptive measures have been included. It would finance measures to manage agriculture run-offs; restore and reserve wetland and shorelines; and expand urban drainage, wastewater collection and treatment, solid waste management, flood control and other sanitation facilities. Development of environmental compensation market mechanisms in Lijiang could potentially be effective instruments to manage agriculture run-offs.

Component II: Urban Environment Infrastructure Development for County Towns: It will assist some 20 county towns in Kunming, Lijiang, Dali and Wenshan in developing urban infrastructure critical for economic growth. It would consist of: (i) construction of sewer collectors and wastewater treatment plants, including drainage; (ii) development of solid waste management systems; (iii) flood protection and control; and (iv) preservation work for natural assets and scenic parks. The viability of these components will be further evaluated during the project preparation. In financing conservation works, it will also engage Lijiang and Dali in policy dialogue on cultural heritage management, in coordination with other supporters such as UNESCO.

To assist further project preparation, the French Government agreed to provide a grant and a consulting company has already been mobilized. Grant funding for project preparation for Dianchi/Kunming components are being considered by USTDA.

D. Project location (if known) Yunnan is located in southwestern China at a latitude of 21?09?-29?19? N, and a longitude of 97?39?-106?21? E, with a total area of 394,000 km2 and a population of 43.8 million people. It is bounded by Guangxi, Guizhou, and to the east and north in China, and bordered by Vietnam, Laos and to the south and southwest. Yunnan Province is one of the ?western provinces? defined by the central government in its overall ?West Development? strategy, which intends to rally the urbanization and economic development in the western China to close the gaps with the eastern coastal regions of the country.

Kunming is the capital city of Yunnan. It is located at the north end of Dianchi Lake, and surrounded by mountains to the east, north and west. The Municipality covers an area of 21,111 km2 and a population of 5.1 million people within its five districts and eight counties. The Kunming component under YUEP will cover Kunming City and its six counties of Songming, Luquan and Xundian, Chenggong, Yiliang and Shiling in three catchment areas of , Nanpan River and Dianchi Lake.

Dali Prefecture is located in the central west of Yunnan, some 300 km from Kunming. It covers an area of 29,459 km2 and a population of 3.4 million people in its capital city of Dali and eleven counties. The Dali component under YUEP will target the pollution control from the , , and other non-point pollution sources sounding the , a nationally defined protected lake for water resources and tourism.

Lijiang Municipality is located in the northwest of Yunnan, some 400 km from Kunming City. It covers the capital city of Lijiang and four counties in an area of 20,600 km2 with a population of 1.1 million people. The Lijiang component under SUEP will cover Lijiang City, Yulong County and some rural counties as proposed during the July identification.

Wenshan Prefecture is located in the southeast of Yunnan with bordering to Vietnam, some 300 km from Kunming City. The Prefecture covers an area of 31,400 km2 with a population of 3.4 million people in its capital city of Wenshan and seven counties. The proposed project components for YUEP for Wenshan part are located in Wenshan County, , Funing County, , Yanshan County and .

E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] Yunnan is a repeated borrower for Bank-financed urban project. From 1997-2005, it implemented Yunnan Environment Project (YEP). The current proposed Yunnan Urban Environment Project is a follow-up of YEP.

F. Environmental and Social Safeguards Specialists

II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X This is a Category A project based on the project proposals received during the identification missions. It includes fifteen wastewater treatment systems (5000-50,000 m3/day, both or either of wastewater treatment plant and sewer/drainage system), ten landfill sites, six river or lake rehabilitation components, two cultural heritage rehabilitation and protection components and other relevant facilities of water supply and environmental monitoring. Also, for Kunming and Dali components, the proposed project would tackle the lake basin management and pollution control issues for Dianchi and Erhai lakes, and a regional EA might be necessary for this type of project components.

During the identification missions, it was noted that no firm actions have been taken for the EA preparation, including baseline data collection. Currently, the provincial PMO is recruiting an EA practitioner for the project wide EA preparation, and respective project municipalities are recruiting their EA consultants after the confirmation of project components by the Bank July identification mission. Natural Habitats (OP/BP 4.04) X The proposed project finances six lake/river rehabilitation components, including wetlands restoration and ecological construction at the estuaries of inlet streams to the lakes of Erhai in Dali and Puzhihei in Wenshan for water pollution abatement and water purification. For Dali, such interventions are planned for the rehabilitation of five rivers into the Erhai Lake. As told, relevant studies and pilot projects have been carried out by local and international academia since early 1990s, and ecological implications were considered in the previous practices. For Puzehai Lake in Wensha, some studies were carried out by local academic institutions. As Erhai is a national protected lake and Puzhehai a provincial protected lake, Natural Habitats policy is triggered and the implication of proposed activities needs to be carefully reviewed. Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Cultural Property (draft OP 4.11 - OPN 11.03)

Yunnan is a famous tourism destination for both its natural scenic spots and rich cultural heritages. The four project cities, especially Lijiang and Dali are internationally recognized culturally rich cities. During the identification mission, Lijiang and Dali both submitted a proposal to include cultural heritage components in the project, namely Sleeping Lion Mountain Area rehabilitation in Lijiang Old City, and Dali Old City Wall and Road Rehabilitation. The task team planned to send a cultural heritage specialist to review the situation in the next preparation mission. Indigenous Peoples (OP/BP 4.10) X The project scattered in about 20 counties/districts or cities of two prefectures and two municipality, including Wenshan Zhuang and Miao , Dali Bai Autonomous Prefecture, Lijiang Municipality and Kunming Municipality. About 13 ethnic minority groups in total will be affected by the proposed project. The adverse impacts are mainly related to land acquisition and housing demolishing. Most proposed components in Kunming municipality will benefit ethnic minority population and they do not seem to have direct adverse Safeguard Policies Triggered Yes No TBD impacts on ethnic minority communities.

To assess the potential positive and adverse effects on ethnic minority groups and to determine the way how the project complies with the policy, it was agreed to conduct a social assessment which would: a) conduct a baseline survey on demographic, social, cultural and traditional characteristics of affected ethnic minority communities; b) review all policies and programs applied to ethnic minority groups in the project areas; c) carry out a process of free, prior and informed consultation with affected ethnic minority groups; d) fully identify views of ethnic minority groups and ascertain their board community support for the project; e) identify the measures to avoid or mitigate adverse impacts on ethnic minority communities and the ways for minority community benefit from the proposed project in culturally appropriate manner. Involuntary Resettlement (OP/BP 4.12) X Based on the proposals provided, almost all the project components would need land acquisition and some relate to resettlement. This is due to the nature of urban and environment project, as are the case for many Bank financed projects elsewhere in China. During the identification mission, two project cities provided some data and information on land acquisition and resettlement. In case of subcomponents under Kunming city, some 50 ha land needs to be acquired but limited number of families (63 households) to be resettled because most of the lands are either hilly or public-owned. However, the site visits in Kunming suggested that such data and information were still rough and limited, and more detailed and accurate information and data should be collected during project preparation. As agreed with the provincial PMO and city PMOs, the cities will carry out land acquisition and resettlement surveys with the help by consultants after the Bank identification mission when most of the project components are confirmed.

Social and economic survey, especially affordability survey for the use of public facilities in the four project municipalities is also critical, as many of the counties and cities are lagging areas in terms local economic capacity and people?s income while the governments tends to make the public utility entities financially more viable through raising tariffs so as to attract private sector participation. This was noticed during the pre-identification mission that on one hand quite a few counties are still nationally poverty counties but on the other hand, the planned tariff level are higher than that in many cities in eastern part of China.

As mentioned earlier, the provincial and cities are in the process of selecting consultants for the project level RAP and city level RAPs? preparation. Safety of Dams (OP/BP 4.37) X One of the project subcomponents, a water supply system (6000 m3/day capacity) in Qiubei County of Wenshan Prefecture plans to draw water from an existing reservoir some 20 km away. This reservoir was built in 1958, originally for irrigation uses, with an existing dam of 38 meters in height. The policy of Safety of Dam is therefore trigged. Projects on International Waterways (OP/BP 7.50) X The Erhai Lake in Dali discharges its water to the Lanchang River, the upper reaches of the Mekong River, through its tributary of Yangbi River. Wenshan County and Malipo County in Wenshan are in the catchment of Red River. They discharge water into Red River in Viet Nam through Lu River, an upper reach tributary of the Red River. The pollution reduction through the Safeguard Policies Triggered Yes No TBD implementation of the proposed components would benefit the two international rivers. Projects in Disputed Areas (OP/BP 7.60) X

Environmental Category: A - Full Assessment

III. SAFEGUARD PREPARATION PLAN

A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: 07/30/2007

B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: N/A

C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing1 should be specified in the PAD-stage ISDS. B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing should be specified in the PAD-stage ISDS.

IV. APPROVALS

Signed and submitted by: Task Team Leader: Mr Takuya Kamata Approved by: Regional Safeguards Coordinator: Mr Glenn S. Morgan Comments: Sector Manager: Mr Keshav Varma Comments:

1 Reminder: The Bank’s Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.