Report No. PID7987

Project Name - Basin Flood Control... Project

Region East Asia and Pacific

Sector Rural Development

Public Disclosure Authorized Project ID CNPE64730

Implementing Agencies Provinces of , and

Initial/Updated PID Date June 20, 1999

Appraisal Date November 8, 2000

Tentative Board Date February 17, 2000

1. Background China's rivers and floodplains have been the focus of human settlement since the dawn of civilization. The rivers were the natural transportation routes and the floodplains

Public Disclosure Authorized offered vast tracts of fertile land. Today, the floodplains provide a home to the bulk of the China's population, most of its industry, and the vast tracts of farmland that feed a population of 1.275 billion people. Unfortunately, this vastly productive area is vulnerable to flooding.

2. In 1855, a flood on the caused it to change course and this led to tremendous loss of life from drowning and . In 1933, the Yellow River inundated over 1 million hectares (ha), and 18,000 people died. In 1938, the Yellow River dike at Huayuankou was deliberately breached to halt the advance of enemy forces; over 5 million ha of land were flooded and many died. On the Yangtze, the 1931 event flooded 3.3 million ha and 140,000 people died, and the 1935 flood in the Han and Lishui Public Disclosure Authorized tributaries led to losses of a similar magnitude. The 1954 flood on the Yangtze, one of the worst in history, caused widespread damage and loss of life that would have been much worse without the new, recently completed dikes. The 1998 flood on the Yangtze coincided with torrential rain over the middle and lower reaches, and damage was estimated at Y 158 billion ($20 billion).

3. Dikes to protect land from the annual floods date back centuries and in some places more than 2,000 years. Since the creation of the People's Republic, these incomplete and poorly maintained dikes have been strengthened and extended. At the same time, there has been rapid growth in the value of assets protected by the dikes and this demands much higher levels of protection. In the past, a breach of a dike might destroy a low- value field crop and inundate houses and public buildings. But Public Disclosure Authorized now, the property at risk includes modern factories, processing plants, and high-value commercial real estate, and potential crop losses can range from $1,500 per ha for field crops to several times that figure for vegetable gardens and orchards.

4. The Government's strategy for tackling the flood problem has evolved over the years. Its main elements are described below. - Construction of Dikes and Protection of Riverbanks Against Erosion. Over 200,000 kilometers (km) of new and rehabilitated dikes were completed, protecting some 32 million ha of cultivated land (33 percent of the total), and about 316 million people, although the protection standards are not ideal. Among these, 56,000 km of levees are on major rivers protecting some 21 million ha of cultivated land and about 216 million people in agricultural areas of key cities, small towns and industrial centers. Construction of a dike requires that it is high enough to exclude an extreme flood. The difference in height between a dike designed for a 50-year flood and a 1,000-year flood is relatively small on most rivers and the higher level is justified by the potential losses if the dike is overtopped. Dikes are normally found on the natural riverbank some distance from the river. A common problem is seepage through the foundation material. This is known as "piping," and it can lead to such a loss of material that the bank and the dike collapse and are then overtopped. This happened at the site of the only breach of the Yangtze dikes in the 1998 flood. This problem can usually be treated by adding material to the inside (land side) face of the dike at the site where seepage appears. Bank erosion can cause bank collapse and threaten the dikes. On the Yangtze, rock aprons are placed to protect the bank. On the Yellow River, rock spurs are built to deflect the flow from the vulnerable section of riverbank. - Urban Flood Protection. Dikes also need to be constructed around cities to protect the cities from floods. There are presently 16,000 km of dikes around cities. About 530 cities out of 660 cities in the country need additional protection of key urban and industrial sites from floods. Most of the cities that are already protected need to be protected to higher levels. It is internationally recognized that, at the least, key cities need to be protected from floods of in a 100-year recurrence period. However, 80 percent of the cities in China are protected from floods of 1 in 50 years and less and 65 percent are 1 in 20 years and less. Almost 65 percent of the $130 billion of flood damage that occurred during 1990-98 was in city and township areas that had low level of protection or were unprotected. In 1996 the Government embarked on a major program on upgrading and investing in new urban flood protection. - Creation of Flood Detention Areas for Temporary Storage of Flood Waters. Detention areas can be natural lakes or low- lying areas designated for temporary flood storage. The Dongting Lake on the Yangtze serves as a natural detention area but its capacity has declined over the years because of siltation and land reclamation. The artificial detention areas, on most rivers, contain high-value farmland and other valuable assets. The use of a detention basin is, therefore, a last resort to prevent much more severe losses that would be incurred by flooding the basin. About 98 localities have been designated as flood diversion areas, providing off-stream flood storage for the major rivers, particularly in the Yangtze, Huai, Hai and Yellow River Basins. These areas have a

-2 - total capacity of 97 billion cubic meters (bcm) and are capable of raising flood protection standards, typically from a 20-year return period to 50 or 60 years. However, at present there are 16 million people living in these detention basins and they have cultivated 2 million ha. The Government has embarked on a major program to safeguard the people living in these basins and also to resettle some of the people. - Dredging of River Channels and Removal of Polder Development in the Channel Areas. The natural channels often have inadequate conveyance capacity. Part of the reduction in capacity is due to siltation and part due to polders and structures built within the river channel. Dredging to enlarge channels can lead to significant increases in capacity and lower flood levels. This has been particularly successful in the lower reaches of the Huai River. However, in addition to desilting, the Government is removing the polders within the river channels. - Construction of Dams on the Rivers to Reduce Downstream Flows. Over 84,000 reservoirs, with a total storage capacity of 450 bcm, have been built, most having multipurpose functions including flood protection. Some 374 large reservoirs with a total capacity of 325 bcm, and 2,562 medium-size reservoirs with a capacity of 70 bcm have been built in the seven major river basins to regulate and mitigate flood flows. The function of dams on the main rivers and tributaries is to intercept floodwaters and thereby reduce peak flows and flood volumes. Examples of this approach are the Dam on the Yangtze and the Xiaolangdi Dam on the Yellow River. Although there are many dams on the tributaries and main stem of rivers and there is significant flood storage that could be used, about one third of the dams are unsafe. The dams that were built between 1949 and 1957 were generally of reasonable quality but the spillway and outlet capacity were grossly undersized due to lack of hydrologic information. Between 1957 and 1975 the quality of dams was very poor due to poor designs and poor construction methods. After 1975 the quality of dams built was generally of good quality. The Government has proposed Y 330 billion to upgrade and rehabilitate unsafe dams. CIDA has a $6.0 million program to assist in developing a pilot rehabilitation program for the 10 major dams and to set up institutional arrangements for large-scale dam rehabilitation programs. - Improved Drainage Systems Behind the Dikes to Mitigate Flooding Caused by Direct Rainfall. Heavy rain behind the dikes can cause flooding if high river levels impede drainage. Drainage systems must be designed to move the water out as quickly as possible after the river levels recede. Pumps are needed to drain the land when river levels are high, but it is seldom economically justified to design for more than a 10- year storm. - Soil and Water Conservation in the Drainage Basins of the Rivers. The flood problem can be aggravated by sediment accumulation in riverbeds and in the lakes connected to the rivers. In the Yellow River the riverbed in the lower reach is rising at a rate of nearly 1 meter every 10 years. Measures to

-3 - curb the sediment runoff that causes this problem in the Yellow River include sediment check dams, afforestation, and terracing of the slopes. This has led to a marked decline in sediment flow in some large tributaries of the Yellow River. Sediment buildup is also present in the main rivers in the Hai He and the Huai He river basins. On the Yangtze, sediment buildup has reduced the capacity of Dongting Lake to function as a natural flood control reservoir. Since the 1998 flood, the Government has ordered a reduction in logging and it has plans to speed up soil and water conservation programs in the tributary basins of the Yangtze. An IDA-financed project in the Loess Plateau, in the Yellow River Basin, has shown that soil and water conservation can be made compatible with profitable forestry and crop production, and a marked improvement in farm incomes.

5. Sector Issues to be Addressed by the Project and Strategic Choices. The main sector issues in flood control in the Yangtze Basin are as follows: - The existing flood control standards of the Yangtze River are at very low level, which are not coping with the social and economic status of the region. The Yangtze River Basin is a region with a relatively developed economy, but the flood protection is for less than a 40-year return period. The Jinjiang stretch is the focus of flood protection but can only safely pass a peak flow of 80, 000 cubic meters per second (m3/s) under the condition of using the Jinjiang detention bases, approximately equivalent to a 40-year frequency. The flood control standards without using the Jinjiang detention is only a 10-year return period. The flood control standards for the middle reach of the Yangtze, which the proposed focus is on, is generally only a 10- to 20-year return period and the flood control standards in the middle and lower reaches of the major Yangtze tributaries in Sichuan Province can only reach to a standard of a 5- to 10-year return period. - The flood control standards of some major cities along with the river are not adequate. Some of the cities have no flood protection measures.. A large number of cities along with the river suffered economic losses of different extents due to flooding. - Flood detention basins are heavily populated and poorly protected. Detention basin facilities could be improved to protect people in the event that the detention basins are to be used. There is no flood-proofing of buildings in the detention basins and there is a lack of proper main roads to evacuate people if people are to be moved. The safety of local people cannot be guaranteed when the flood detention areas are used. Consequently many detention basins are hardly usable during heavy flooding. For example, one of the difficulties of using the Jinjiang detention basin in 1998's Yangtze flood was that the safety of people living in the basin could not be assured. Finally when it was ascertained that the basins will have to be used and the 300,000 people had to be moved it cost over Y 2.4 billion for moving the people. - The existing flood control levees have been poorly designed

- 4 - and very poorly constructed and dikes are unsafe. Some levees were constructed on permeable thick foundation layers and under long-time high water levels they leak and cause piping, which then results in the failure of the foundations of the levees. For example, breaches, piping and slope slides were caused during the 1998 flood in many dikes. There are still many dams and reservoirs with safety problems, which need to be rehabilitated and updated.

6. Yangtze Basin Flood Control Master Plan. The master plan of 1990 was revised several times and the main strategies were unchanged after the 1998 flood. This master plan calls for a number of actions to be taken, i.e. - the dikes will be the main works to protect all areas. The dikes will however have to be to designed to the flood levels of the 1954 storm; - the Three Gorges Project will be the main control structure and will provide 22 bcm of flood storage, with supplemental control from upstream and tributaries reservoirs (15 reservoirs with a total capacity for flood storage of 19.1 bcm); - construction of detention basins (63.3 bcm storage) to store water in the event of floods to levels that occurred in 1870; - river training; soil and water conservation in the upper Yangtze to reduce soil erosion, especially in the tributaries and to the lakes; - enhancing the capacity of lake and floodways by removing flood-resistance polders and return the lakeside farmland to lake area to regulate floods; and - a combination of engineering and nonengineering measures such as flood-proofing of low areas, voluntary resettling of people from flood-prone area. All the six measures are being implemented to various degrees.

7. Project Objectives. The objective of the project is to (a) strengthen the flood protection dikes along the middle and lower reaches of the Yangtze River and, thereby lower the risk of breaches in the dikes that could lead to catastrophic damage; (b) rehabilitate the floodgates and structures along the dikes to release water from tributaries to reduce floods behind the dikes; (c) develop a flood forecasting system and emergency preparedness systems to reduce flood loss; (d) develop autonomous provincial institutions for management of dikes and to enhance self- financing through flood levy collection from the beneficiaries. In addition basin-wide institutions should be developed to ensure coordinate dike maintenance and operation.

8. Project Description. The project scope as indicated in the project documents consists of the following: (a) Dike strengthening and bank reinforcing of a total of 695 km of dikes (142 km in Hunan, 430 km in Hubei and 123 km in Jiangxi). The main measures of the dike strengthening project include the following: (i) Raise the height of the dikes to provide an adequate margin (freeboard) above the design flood level;

- 5 - (ii) Protect the face of the dike at vulnerable locations with dumped or hand-placed stone, or concrete blocks (revetment); (iii) Protect the river bank at vulnerable locations by an apron or heavy revetment. (iv) Treat the main body of the dike, where necessary, by a grout curtain (injection of chemicals) or by geosynthetics. (v) Where piping is evident, treat the foundation material that underlies the dike by an impermeable blanket or a grout curtain. (vi) Repair/upgrade culverts and gates through the dike. (vii) Dredge the river in places to stabilize the river course. The proposed project will focus on the most important portions of Class I, II and III main dikes of the Yangtze. There are no significant strategic or technical issues to be resolved. The main uncertainty is the definition of the part of each province's program to be financed by the Bank. (b) Electrical and mechanical works, which involves: fabrication and installation of steel structures for floodgates, etc. and installation of pumps and other equipment. These structures are for discharge of the tributary flows. The lack of proper facilities to discharge of the tributary flows was the main cause of inundation of large areas in the 1998 floods. (c) Resettlement and environmental management for the three provincial areas where the dike rehabilitation is being undertaken. A detailed environmental management program (EMP) will be developed which will cater for environmental management of the areas around the dike construction. An environmental monitoring of possible impacts on the river will also be considered. A detailed resettlement action program (RAP) will be developed and implemented for all affected people around the dike construction areas. This component will also include independent resettlement monitoring and panels for environmental and resettlement reviews. (d) Flood Forecasting and Flood Dissemination Systems for the three provinces. Upgrading of the existing main telecommunication for flood information gathering and setting up of flood forecasting systems, dissemination of flood information data to township and village levels. (e) Engineering and project management. This component will include the final design and working drawings by the provincial design institutes and the construction supervision by licensed teams. The component will also include design review panel. (f) Institutional Development. Th institutional development component will develop the concept of the owner (Provincial Flood Management Office) to be responsible for the construction and operation and maintenance of the dikes. In addition a flood control levy will be imposed on all beneficiaries to recover all the O&M costs and part of the capital costs.

9. Project Costs and Financing. The total project cost is

- 6 - estimated to be around $965 million. The project would be financed by a proposed IBRD loan of $300 million (31 percent) and local counterpart funding equivalent to 665 million (69 percent).

10. Project Management Structure. : A Project Management Office (PMO) will be set up in each province. The purpose of the PMO will be to provide coordination between the government agencies involved in the project. The engineering and procurement for the project will be handled by a special project office (SPO) in each Water Conservancy Bureau for each Province. The SPO will be the Employer for all contracts. Design and preparation of bid documents will be the responsibility of a local design institute and supervision will be handled by a supervising company; these services will be procured by evaluation of competing proposals. The Yangtze River Basin Water Resources Commission (YRC) will review the basic design criteria and the feasibility studies prepared by the provinces. The World Bank Office (WBO) in each of the provincial finance bureaus will manage the use of the Bank loan. The WBOs have handled numerous Bank projects. A Special Account will be set up in each province. The PMO will review progress reports and applications for disbursement from the Special Account before they are forwarded to the WBO.

11. Rationale for Bank Involvement. The experience in China is that Bank financing of large civil works leads to a more structured approach to planning, design and procurement than is customary on locally financed projects. For example, design review procedures are established and procurement packages are generally larger and attract wider competition. The Bank involvement has often resulted in as much as 20-25 percent savings in procurement. The quality of works is generally much better because of better supervision and the counterpart funds are met by the various level of government. Implementation organization arrangements are also much more transparent and driven by technical and economic judgments rather political. Also, Bank involvement tends to promote exchanges between Chinese and foreign experts.

12. Lessons Learned. Since 1982, the Bank has assisted China in over 50 water resource-related projects. Overall, the implementation of these projects has been quite successful. The key lessons learned from past projects include: - project preparation should include development of detailed organizational and staffing arrangements for implementation, inter alia, a high-level liaison group should be formulated and agreed before implementation; - affected people should be involved from the early stages of project preparation and throughout the implementation period, to gain and maintain their support; - international consultants and technical panels can make substantial contributions to improving the designs, economic impact assessment, and resettlement planning and design; - counterpart funding should be committed before implementation, with the direct participation of the provincial planning commission and finance bureau;

-7- - procurement for major civil works should be started early in the preparation period so that bid award will correspond with loan effectiveness in order to avoid delays and cost overruns; - implementation support to the executing agency should include a competent construction supervisory organization suitably reinforced with international consultants; - cost recovery should be sought from the beneficiaries of flood protection to make the project sustainable; and - projects should include institutional development support for the strengthening of the project implementing and management organizations, including transfer of know-how and technology from international consultants.

13. The above lessons, together with the key success factors (KSF) identified by the Bank such as strong government commitment and ownership, beneficiary participation, O&M plan, water charges, financial autonomy of project entity, etc., will be reflected where appropriate in the project design.

14. Environmental and Social Aspects. An environmental impact assessment is being prepared by each of the provinces under the guidance of the Yangtze Basin Water Resources Protection Institute (YBWRPI). The preparation for this work started in April 1999. The YBWRPI's costs/fees are being shared by the provinces. In addition international consultants have been hired to supervise the preparation in June and August before the draft report is produced.

15. The major impact of this project is the resettlement of about 63,000 people. Most of these people will move backward from their present locations about 1-1.5 km. Although the houses are affected, their agricultural land may not be affected. Most of the people have been affected by the 1998 floods and want to move. There is considerable experience in resettlement and in this area since the Government is in the process of resettling 2 million people from the riverine polder areas that were flooded out. Compensation standards have been established but will be reviewed during the preparation of the project.

16. Since the dikes are being rehabilitated and there is no change in alignment, the impact on river flows will not be changed, even during flood flow periods. Changes of navigation wharves where the rehabilitation of dikes will take place is also negligible since the wharves project into the water and the dikes are generally quite far inland from the wharves. River training to maintain a river channel will improve and stabilize the river flows and channel. Overall, the rehabilitation of the works will have negligible impacts

17. Impacts due to the huge labor force on site during construction will be reviewed and a detailed environmental management and monitoring component will be incorporated to ensure that public health, water, air and land pollution are offset by the environmental management plan included in the contract of contractors.

-8- 18. Project Benefits. The economic benefits arise from (1) avoidance of losses due to a reduced risk of breaches in the main Yangtze dikes, (2) avoidance of having to resort to the flood detention areas except in extreme floods, and (3) lower costs for emergency operations during floods. In the past 40 years a number of high floods have occurred that could have caused breaches at weak sections of the dikes. In the 1998 flood, numerous vulnerable sites were identified where breaches were averted by emergency measures. The economic value of loss avoidance (Item 1) was calculated in the feasibility study as follows: (a) determine the floods in the 50-year period that could have caused breaches; (b) identify several sites in each province where breaches would be likely during a high flood; (c) estimate the losses at each site in the event of a breach; (d) add the losses for the period and divide by 40 to obtain an unadjusted annual benefit; (e) escalate the annual figure to account for continuing development and growth of assets in areas behind the dikes. The net present value worked to be $730 million and the rate of return for the three sections of the dikes in the three provinces are 15, 23 and 17 percent.

19. Project Sustainability. The main dikes of the Yangtze survived an exceptional flood in 1998 with the exception of one breach that was closed during the flood. This is evidence that the provinces maintain the Yangtze's flood control infrastructure and act promptly to counter problems during high floods; this ensures the sustainability of the works to be financed by the project. There is a risk that during a high flood erosion of the riverbanks could conceivably threaten the dike. However, dike failure during a flood, once the dikes are strengthened, is a remote possibility.

20. Risks. The major risks are shown in the following:

Risk

From Outputs to Objective Risk Rating

From Components to Outputs 1. On the completion of project L Retain the main provincial design designs institutes with panel of design reviewers. In addition undertake careful monitoring of the schedules by the PMO and design reviewers

2. Counterpart funds inadequate or L The counterpart funding requirements for not available in time two of the provinces are mostly supplied by the Central Government. Hence, it does not pose any problems. For Hubei province the funding is coming from several sources. Some of the sources are from Central Government but some are from local government sources. The PMO and Provincial Finance Bureau should work

9 together to ensure the local counterpart funds are allocated before the end of the financial year for the next year

3. Delays in resettlement M Delays can be avoided by early surveys of implementation due to delays in affected people and determination of approval of resettlement budgets, compensation payments and preparation of inadequate planning, failure in the Resettlement Action Plan. Two of the implementation and erosion of provinces have already made detailed compensation value through preparation. inflation

4. Damage by extraordinary floods M Establish a early warning system and also have a temporary coffer dam for sections of the dike rehabilitation that could be prone to damage

Overall Risk Rating: Modest

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

Contact Points:

Daniel Gunaratnam The World Bank Resident Mission in China 9th Floor, Bldg. A, Fuhua Mansion No. 8, Chaoyangmen Beidajie Dongcheng District, 100027 TEL: 86-10-6554-3361/FAX: 86-10-65541686

Mr. E. Kramer East Asia & Pacific Region The World Bank Group 1818 H Street, N. W. Washington D.C. 20433, USA Tel: 1.202.477.1234

The InfoShop The World Bank 1818 H Street, N.W. Washington D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500

Processed by the InfoShop week ending July 30, 1999.

Note: This is information on an evolving project. Certain components may not be necessarily included in the final project

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