Document of The World Bank
Public Disclosure Authorized
Report No: ICR0000873
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD 4348-CHA, IDA 3097-CHA)
ON A
LOAN/ CREDIT
Public Disclosure Authorized IN THE AMOUNT OF
US$72.0 MILLION AND SDR14.9 MILLION
(US$20 MILLION EQUIVALENT)
TO THE
PEOPLE'S REPUBLIC OF CHINA
FOR THE Public Disclosure Authorized
GUANGXI URBAN ENVIRONMENT PROJECT
June 23, 2008
Urban Development Sector Unit Sustainable Development Department East Asia and Pacific Region Public Disclosure Authorized
CURRENCY EQUIVALENTS (Exchange Rate Effective March 2008) Currency Unit = Yuan Yuan 1.00 = US$0.14 US$ 1.00 = Yuan 7.2 Fiscal Year January 1 – December 31
ABBREVIATIONS AND ACRONYMS
BOD Biological Oxygen Demand BOT Build Operate and Transfer COD Chemical Oxygen Demand DRC Development Reform Committee EA Environmental Assessment EPB Environmental Protection Bureau FM Financier Management GEPB Guangxi Environmental Protection Bureau GM Guilin Municipality GR Guangxi Region IPCAP Industrial Pollution Control Action Plan ICR Implementation Completion & Results (Report) GAR Guangxi Autonomous Region GSC Guilin Sewerage Company GUEPO Guangxi Urban Environment Project Office JBIC Japan Bank for International Cooperation LOA Loan Administration m3/d Cubic meters per day MOF Ministry of Finance NGO Non-government Organization NSC Nanning Sewerage Company NWSG Nanning Water Services Group NM Nanning Municipality O&M Operation and Maintenance PDO Project Development Objective PMO Project Management Office QAG Quality Assurance Group QEA Quality at Entry Assessment QSA Quality of Supervision Assessment RAP Resettlement Action Plan SAR Staff Appraisal Report SEPA State Environmental Protection Agency STP Sewage Treatment Plant
Vice President Mr. James W. Adams Country Director Mr. David Dollar Sector Manager Mr. Ede Jorge Ijjasz-Vasquez Task Team Leader Ms Chongwu Sun
China GUANGXI URBAN ENVIRONMENT PROJECT
CONTENTS
Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff
1 1. Project Context, Development Objectives and Design 2. Key Factors Affecting Implementation and Outcomes 5 3. Assessment of Outcomes 8 4. Assessment of Risk to Development Outcome 12 5. Assessment of Bank and Borrower Performance 13 6. Lessons Learned 18 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 18 Annex 1. Key Performance Indicators 20 Annex 2. Project Costs and Financing 31 Annex 3. Outputs by Component 33 Annex 4. Industrial Pollution Control Plan 35 Annex 5. Economic and Financial Analysis 39 Annex 6. Resettlement Implementation 42 Annex 7. Bank Lending and Implementation Support/Supervision Processes 44 Annex 8. Detailed Ratings of Bank and Borrower Performance 47 Annex 9. Summary of Borrower's ICR and/or Comments on Draft ICR 48 Annex 10. List of Supporting Documents 64
MAPS - IBRD 29651R, 28799R, 28800R and 36180
A. Basic Information GUANGXI URBAN Country: China Project Name: ENVIRONMENT PROJECT IBRD-43480,IDA- Project ID: P036414 L/C/TF Number(s): 30970 ICR Date: 06/27/2008 ICR Type: Core ICR Lending Instrument: SIL Borrower: CHINA Original Total USD 92.0M Disbursed Amount: USD 78.3M Commitment: Environmental Category: A Implementing Agencies: Guangxi Zhuang Auto. Region Government of Nanning Municipality Government of Guilin Municipality Cofinanciers and Other External Partners:
B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/03/1996 Effectiveness: 10/30/1998 10/30/1998 Appraisal: 06/26/1997 Restructuring(s): 05/24/2005 Approval: 06/16/1998 Mid-term Review: 11/02/2001 Closing: 12/31/2004 12/31/2007
C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance:
i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes Satisfactory time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:
D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Agro-industry 4 General transportation sector 2 General water, sanitation and flood protection sector 10 Sewerage 76 80 Solid waste management 5 7 Water supply 13 3
Theme Code (Primary/Secondary) Access to urban services and housing Primary Not Applicable Environmental policies and institutions Primary Not Applicable Pollution management and environmental health Primary Primary Water resource management Primary Secondary
E. Bank Staff Positions At ICR At Approval Vice President: James W. Adams Jean-Michel Severino Country Director: David R. Dollar Yukon Huang Sector Manager: Ede Jorge Ijjasz-Vasquez Keshav Varma Project Team Leader: Chongwu Sun Songsu Choi ICR Team Leader: Chongwu Sun ICR Primary Author: A. D. C. Godavitarne
ii F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document) The project objectives are: (a) to improve the quality of major water bodies, in particular Chaoyang stream and Yongjiang in Nanning and Lijiang and its tributaries in Guilin; (b) to regulate the flow of the Lijiang; (c) to improve institutional and financial capacity for environmental protection, environmental services and water resource management; (d) to pilot a participatory approach to environmental improvement in poor neighborhoods; and (e) to implement pilot schemes for control of sugar refinery pollution.
Revised Project Development Objectives (as approved by original approving authority)
(a) PDO Indicator(s)
Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Improvement of sewerage and drainage management in Nanning. Chaoyangxi and Yongjiang in Value These are available in the Nanning should quantitative or project files for each attain or maintain Qualitative) component. Class V and Class III respectively. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement) Indicator 2 : Improvement of sewerage and drainage management in Guilin. Lijiang River in Value These are available in the Guilin should quantitative or project files for each maintain Class II Qualitative) component. water quality. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement) Indicator 3 : Sugar refinery pollution control. Implementation of the component Value will ultimately Available in the project quantitative or translate into files. Qualitative) better water quality for major rivers in the
iii region. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement) Indicator 4 : EPB strengthening. Improvement of monitoring capacity, as regards frequency Value Available in the project and variables quantitative or files. analyzed, Qualitative) improved reactions times for response to accidents and complaints. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement) Indicator 5 : Small area improvement. About 100,000 people who are current residents with incomes Value These are available in the below the city quantitative or project files for each average will Qualitative) component. benefit from this component to have improved environmental service. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement) Indicator 6 : Solid waste management in Guilin 400 ton/day capacity landfill Value These are available in the has been realized quantitative or project files. and 800 ton/day Qualitative) transfer capacity will be realized. Date achieved 10/31/1998 12/31/2006 Comments (incl. % achievement) Indicator 7 : Institutional development for sewerage companies in Nanning and Guilin. Value These are available in the The companies
iv quantitative or project files for each should Qualitative) component. demonstrate attributes of financial viability and have a continuous availability of funds for reinvestment. Date achieved 10/31/1998 12/31/2007 Comments (incl. % achievement)
(b) Intermediate Outcome Indicator(s)
Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Length of the sewer constructed in Nanning and Guilin Value Data to be sought (quantitative 0 during ICR or Qualitative) preparation. Date achieved 10/31/1997 12/31/2007 Comments (incl. % achievement) Indicator 2 : Length of sewers cleaned and repaired every year (km/annually) Value (quantitative NA 160 km or Qualitative) Date achieved 10/31/1997 12/31/2007 Comments (incl. % achievement) Indicator 3 : Jiangnan WWTP, voluume of sewage treated (000 m3/day) Value (quantitative 0 240,000m3/day or Qualitative) Date achieved 10/31/1997 12/31/2007 Comments (incl. % achievement)
v G. Ratings of Project Performance in ISRs
Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 08/12/1998 Satisfactory Satisfactory 0.00 2 02/03/1999 Satisfactory Satisfactory 3.50 3 09/20/1999 Satisfactory Satisfactory 3.95 4 03/31/2000 Satisfactory Satisfactory 4.07 5 09/20/2000 Satisfactory Satisfactory 4.82 6 03/30/2001 Satisfactory Unsatisfactory 7.68 7 12/17/2001 Satisfactory Unsatisfactory 10.58 8 06/24/2002 Satisfactory Satisfactory 12.05 9 12/19/2002 Satisfactory Satisfactory 14.91 10 03/26/2003 Satisfactory Satisfactory 14.91 11 10/08/2003 Satisfactory Satisfactory 19.45 12 03/31/2004 Satisfactory Satisfactory 21.12 13 11/23/2004 Satisfactory Satisfactory 23.94 14 06/21/2005 Satisfactory Satisfactory 27.57 15 01/19/2006 Satisfactory Satisfactory 39.69 16 12/28/2006 Satisfactory Satisfactory 56.54
H. Restructuring (if any)
ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 05/24/2005 S S 27.57
vi I. Disbursement Profile
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1. Project Context, Development Objectives and Design
1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance)
Guangxi Zhuang Autonomous Region was one of the poorest areas in Western China, due in large part to the infertile, yet picturesque karst hills, low levels of education and infrastructure, and restrictions that were imposed on the Region due to frontier issues with Vietnam. Key sector issues addressed in the project are:
Environment and Water Quality. Water pollution was a serious problem in both Nanning (the capital city) and Guilin (a premier tourist city). Nanning had no wastewater treatment facility; untreated domestic and industrial wastewater discharged to the Yongjiang, frequently interrupted Nanning’s drinking water supply. Water quality in Nanning’s Chaoyang Stream (worse than Class V1), and the Yongjiang (in danger of falling to Class IV to V), posed serious public health problems, constrained social and economic development of the city and its role, in recent years, as the gateway town for developments associated with the China-East Asian cooperation initiative (ASEAN). In Guilin, the deteriorating water quality and inadequate water depth in the Lijiang and the Three Lakes (in the city), had serious impacts on Guilin’s environment and its growing tourism industry. Discharge of sewage to tributaries of the Lijiang (Xiaodongjiang and the Taohuajiang) and the Lakes degraded them to worse than Class V standard during the dry season. Although Guilin had installed wastewater treatment facilities, there were little investments in wastewater collection.
Infrastructure in Low-Income Neighborhoods. Environmental conditions in urban pockets in both Nanning and Guilin continued to deteriorate, due to poor and/or badly maintained infrastructure. Due to inadequate storm drainage, flooding was a regular feature in these areas. Housing was poorly maintained and informal extensions encroached into the road space. Due to the high cost of re-development and the associated social disruption, some areas remained neglected, which led to unsafe and unsanitary living conditions for the urban poor, in addition to the areas being economically depressed.
River Flow Regulation. The insufficient depth of water in the Lijiang and the city’s Three Lakes during the dry season impacted on the functioning of long-distance cruise ships and the smaller tour boats that operated in the Lijiang and the Three Lakes, respectively. Regulating the flow in the Lijiang was not possible due to fragmented responsibilities for water resources management, which interrupted regular operation of tourist cruise vessels, especially during the dry months.
Industrial Pollution Control. At the time of project approval, the most important industrial sector in Guangxi was food processing, which produced heavy pollution loads per unit of output. Sugar refineries produced a tenth of the industrial output, and 72% of the wastewater pollution load. Guilin Municipality GM) had already taken action to relocate and/or close all polluting industries while Nanning had drafted a plan to control industrial pollution, but, needed more data to firm up
1 An explanatory note on water quality classification, water quality parameters and designated uses is provided in Annex 1.
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priorities for different levels of intervention.
Institutional Arrangements. Guilin had a wastewater company before the Project, but it was being operated as a government department. Nanning’s rudimentary wastewater facilities were operated by a government department. Wastewater service providers did not own all their assets or receive the proceeds of wastewater charges, and depended instead on government budget allocations. Thus, the sector was not managed along commercial lines.
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)
The project development objective was to improve the urban environment of Nanning and Guilin to facilitate sustainable economic growth and poverty alleviation in the Region.
Specific objectives were to: (a) improve the quality of major water bodies, in particular Chaoyang Stream and the Yongjiang in Nanning, and the Lijiang and its tributaries in Guilin; (b) regulate the flow of the Lijiang; (c) improve institutional and financial capacity for environmental protection, environmental services and water resource management; (d) pilot a participatory approach to environmental improvement in poor neighborhoods; and (e) implement pilot schemes for control of sugar refinery pollution.
Primary performance indicators were to: (i) maintain water quality of the Yongjiang (Nanning) at Class III, and Lijiang (Guilin) at Class II; (ii) improve water quality of the Chaoyang Stream (Nanning) and the Three Lakes (Guilin) to Class V and Class III, respectively; and (iii) regulate flow in the Lijiang to reach and maintain a flow of 35 m3/sec, and a water depth of at least 2.5 m in the Three Lakes. The SAR also described detailed output indicators for each component.
1.3 Revised PDO and Key Indicators (as approved by original approving authority), and reasons/justification Project development objectives and key indicators remained unchanged during the project period. Minor changes to the key indicators for the Nanning components were agreed between Nanning Municipality (NM) and the Bank.
1.4 Main Beneficiaries (original and revised)
Original Beneficiaries. The original beneficiaries were the Guangxi Autonomous Region (GAR), Nanning Municipality (NM), Guilin Municipality (GM) and Guilin Prefecture (GP), including three towns (Yangshou, Xingping and Baisha) in Yangshou County in Guilin. About 1.6 million residents in the project cities were estimated to benefit directly from the environmental improvements, including about 110,000 people in the pilot initiative to improve poor urban neighborhoods under the small area improvements (SAI).
Revised Beneficiaries. Beneficiaries remained the same except that Yangshou town and Xingping town dropped out of the project. Beneficiaries under the SAI increased to about 180,000 (140,000 and 40,000 in Nanning and Guilin, respectively).
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1.5 Original Components (as approved) Project components, summarized below, were designed to: (a) improve the living environment, improve river water quality, and build sustainable institutions in Nanning and Guilin; and (b) support sustainable tourism development in Guilin. A detailed description of the project components is provided in the SAR.
Sewerage and Drainage in Nanning (US$79.88 million – 47% of total project cost): interception of wastewater discharging to the Yongjiang and the Chaoyang Stream; expansion of the sewer and drainage networks; construction of a 180,000 m3/d sewage treatment plant (STP); improvement in septic tank management; and strengthening water quality monitoring;
Sewerage and Solid Waste Management in Guilin (US$45.70 million – 27% of total project cost): interception and collection of wastewater in the city (including the Three Lakes) and suburban towns; construction of STPs in Xicheng and Beichong, and suburban towns of Yangshou, Xingping and Baisha; construction of a 400 tons/d solid waste landfill and 800 tons/d transfer station, including solid provision of waste collection and transfer vehicles; and strengthening water quality monitoring;
Small Area Improvement (US$9.21 million – 5% of total project cost): improvement of basic infrastructure in low-income neighborhoods targeting about 110,000 people in up to 30 areas in Nanning and Guilin, with community participation in planning and cost sharing of up to 40% to 50% of costs;
Lijiang Flow Regulation (US$23.09 million – 14% of total project cost): dredging of the Three Lakes; lining and extending 26 km of a canal from the Wulixia Reservoir to the Lijiang, including a hydro-power plant (2*0.5 MW capacity) en route; forestation of about 2,000 hectares in the Wulixia catchment and along the Lijiang; and construction and repair of about 28 km of embankments along the Lijiang;
Sugar Refinery Pollution Abatement (US$4.99 million – 3% of total project cost): provision of a sub-loan facility to finance treatment of highly polluting wastewater (stillage) in two sugar refineries, as a pilot;
Institutional Development (US$6.44 million – 4% of total project cost): capacity building for wastewater management, water quality monitoring; and support to develop the Lijiang Water Resources Management Commission.
1.6 Revised Components The following revisions and additional works were included to meet planning requirements and to use cost savings:
(i) Sewerage and Drainage in Nanning. (a) based on SEPA directions, the wastewater treatment standard was increased from primary to secondary treatment; (b) the capacity of the sewage treatment plant (STP) was increased from 180,000 m3/d to 240,000 m3/d to accommodate larger flows; (c) the capacity of the storm water pumping station at Dakengkou was increased from 12 m3/sec to 24 m3/sec, to cater for a 50-year return flood, and without the facility for reverse pumping to
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refresh the Chaoyang Stream; (d) a separate pumping station was constructed with local funding to refresh the Chaoyang Stream; (e) secondary and tertiary sewer networks were increased by about 41 km utilizing loan savings; and, (f) the information system for septic tank management in Nanning was deleted as the responsibility was transferred to another government agency.
(ii) Sewerage and Solid Waste Management in Guilin: (a) the Xicheng STP (30,000 m3/d) was constructed under a BOT contract instead of under the project; and (b) sewerage investments in Yangshou and Xingping towns were constructed using State bonds; only one oxidation pond of 2,500 m3/d capacity was built in Baisha town.
(iii)Small Area Improvement. The number of improved areas was increased to 27 sites and 4 sites in Nanning and Guilin respectively, covering about 180,000 people.
(iv) Lijiang Flow Regulation. An additional diversion channel was constructed from the Lijiang to provide water to farmers and villages en route, in response to local demands; and only one 0.8 megawatt hydro power plant was constructed instead of two 0.5 megawatt plants earlier planned.
(v) Sugar Refinery Pollution Abatement. Two pilots were constructed to treat stillage at two small sugar refineries, but replication did not take place due to the consolidation of small refineries.
1.7 Other significant changes Other significant changes were:
(a) the merging of the Guilin Prefecture with the Guilin Municipality (GM) in 1999, which facilitated, to some degree the management of water uses in the Lijiang;
(b) change in the Dollar-Yuan exchange rate from 8.30 at appraisal to 7.20 at loan closure, increased the demand for counterpart funds, which was compensated by increasing disbursements for civil works;
(c) the deletion of the planned reverse flow feature of the Dakengkou pumping station, and construction of a separate pump station to refresh the Chaoyang Stream; and
(d) project restructuring in October 2004 to accommodate: (i) cost savings of about 31% that arose due to over-estimation of costs, financing some project elements using national bonds (Guilin), and improved procurement efficiency, which were used partly to finance additional wastewater investments; (ii) loan cancellations amounting to US$11.9 million; and (iii) increase in the civil works disbursement percentage to 75 %; and
(e) additional cancellations of US$0.23 million of the loan and SDR0.42 million (US$0.56 million equivalent) of the credit at loan closure.
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2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry
Project Design. The Project correctly addressed the key environmental and tourism-related economic issues facing the Region, and Nanning and Guilin. Project design incorporated international best practice in utility management, and a high degree of attention to project design and results. Investments conformed to the sewerage master plans (for Nanning and Guilin), and water resources management and urban development plans for Guilin.
In order to promote sectoral reform, a condition for project appraisal was the establishment of a new sewerage company in Nanning, and operation of the existing GSC as a commercial enterprise with a business license. The standard cost recovery covenant (of not less than 1.0) was stipulated for both NSC and GSC. In a significant positive departure from the prevailing regional practice at the time, the legal agreements defined the total operating revenue as revenues from all sources related to operations, designed to achieve financial autonomy without subsidies from government
Industrial Pollution Control. The task team recognized that reduction of industrial pollution was essential to achieve water quality objectives. Yet, the scale of the problem could not be tackled at the project level, except for a pilot to demonstrate pollution reduction in sugar refineries, which were heavy polluters. However, it was agreed that Nanning would implement an industrial pollution reduction plan in parallel with the Project, to bring 33 worst polluting industries into compliance with discharge standards. The plan also envisaged increases in the frequency and number of industries to be monitored.
Adequacy of Participatory Processes. The Small Area Improvement (SAI) component was a pioneering initiative in China, which introduced community participation in planning, cost-sharing, and community infrastructure management. The use of social workers to enhance participation and consultation contributed to the success and popularity of the program. A participatory process involving affected people and other stakeholders was also used to prepare Resettlement Action Plans (RAP) and Environment Management Plans, in conformity with the requirements of the World Bank and Government policies and procedures.
Risks and Mitigation Measures Identified at Appraisal. Risks identified included: • Adequacy of counterpart, and operating funds: annual financing burden on local governments confirmed as sufficient and affordable to accommodate infrastructure investments in each locality; and a covenant on financial self sufficiency of wastewater companies was incorporated in the legal agreements; • Institutional capacity to manage increased sewerage facilities: the project included technical assistance for institutional and financial strengthening and training; • Project benefit of improved water quality limited largely to pollution from municipal wastewater: assurances obtained from the Guangxi Government and NM that they will implement pollution control plans as an integral part of the project; • Two cities could curtail funding for sewerage and pollution control: economic growth projections for both cities, and tourism in the case of Guilin, appeared to be good, based on the past and projected growth, and environmental improvements were expected to continue; • Uncertain level of beneficiary participation to assure success in the Small Area Improvement
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component: initial subprojects implemented were to be monitored, evaluated, modified, and expanded based on implementation experience; and • Lijiang water regulation may not be possible in the dry season due to natural and management reasons. The project addressed this issue through the proposal to create the Lijiang Water Commission to manage water resources in the Lijiang basin.
Quality at Entry. Quality at Entry was satisfactory. In addition to the points above, the project design: (i) was correct to be cautious not to create excess capacities in the Nanning STP and the Guilin solid waste transfer station because reliable data on wastewater and solid waste generation were not available at appraisal; (ii) incorporated the industrial pollution reduction plan for Nanning and a pilot for the sugar refineries; and (iii) introduced institutional reforms in the wastewater sector. Project design should have foreseen, however, the demand for water by villages along the Lijiang diversion channel diverting water to the Three Lakes, and the challenges to: create a full-fledged water resources management commission for the Lijiang basin; or make any dent in the sugar industry pollution reduction with a small pilot. The project included technical assistance to support institutional strengthening and training, but not for design, project management and construction supervision, which were routinely included in the China projects. The lack of this support impacted on the already weak capacity of implementing agencies; also noted in the Borrower’s ICR.
2.2 Implementation
Major factors that affected implementation were: the weak and ineffective project management in the first three years, until progress improved significantly in 2002/2003 under new management, and a change in the parent coordinating agency in Guilin; the preoccupation in Guilin with a much larger infrastructure improvement program supported by the central government, which also created a shortage of counterpart funding, especially for the Xicheng and Wulixia subprojects; inclusion of additional works to utilize loan savings, requiring additional time for completion; the SARS and bird flu epidemics, and heavy floods in 2001 and 2006, which resulted in a delay of more than 6 months; protracted discussions with the Bank on the optimum size of the Jiangnan STP, treatment standard, and the appropriate contracting procedure for the STP and the Dakengkou pumping station (i.e., turnkey or other), which accounted for about a two- year delay to complete the Nanning STP; time-consuming domestic approval procedures for ICB contracts; the long delays in detailed design preparation, particularly for the Nanning STP; complexity of resettlement, especially for the Chaoyang Stream works; and inadequate government support in Guilin for cost recovery for wastewater services, resulting in non-compliance of the projects’ financial covenants by GSC. All original components and some additional works were completed for less than the total cost estimated at appraisal, using only 85% of the Bank financing.
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
Detailed outputs and outcomes set out in the SAR for each component were monitored closely by the Project Management Offices and the respective Environmental Protection Bureaus (EPB). The SAR contained very detailed indicators for each component, which proved to be too complex for the available institutional capacity, especially during the initial years. This resulted in the monitoring of key indicators, primarily, by the Environmental Protection Bureaus (EPB). The performance indicators were captured in the quarterly progress reports that collated data from the implementing agencies and the EPBs. A Quality of Supervision Assessment was also carried by QAG. In addition, Bank supervision teams carried out their own monitoring and evaluations and reported the relevant issues in the implementation status reports
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(ISR). The above M &E arrangements helped to identify and address issues of implementation, and take corrective actions as necessary. Much of the excellent water quality data in Annex 1 was supplied by the EPBs at the city and regional levels.
2.4 Safeguard and Fiduciary Compliance
Social Safeguard Issues. Resettlement action plans were prepared and implemented in conformity with Bank and Government policies, in consultation with the affected people. Resettlement assessments show that implementation was completed successfully and that livelihoods and standards of living of affected persons have improved. A total of 1,450 persons were displaced for the works in Nanning and Guilin. The largest resettlement for the Chaoyang Stream works (940 persons) was handled satisfactorily, for which Nanning received a national award for model resettlement. (see Annex 6 for more details)
Environmental Issues. The project was assigned as Category A. The EA and EMP were prepared according to national policies and regulations and the Bank safeguard policies. The EMP was implemented satisfactorily during project implementation. An additional EA was prepared when the capacity of the Nanning STP was expanded.
Financial Management. Appropriate financial management arrangements were put in place to ensure proper use and accounting of project funds. Financial management was carried out satisfactorily, and no significant issues arose during implementation.
Procurement. Procurement activities were done in accordance with Bank procurement procedures, and adequate measures to strengthen capacity for procurement administration were incorporated in the Project. Procurement performance improved significantly after the initial years, and familiarization with the new procedures. However, there were a few cases where the Bank declined to finance contracts because: the design was not approved; or quantities were in excess of those estimated at appraisal; or estimates for contract variations used ‘norm’ rates; or the method of contracting was not approved by the Bank.
Disbursement. Standard disbursement procedures and arrangements were incorporated in the project. Equipment rental was financed for works under the Small Area Improvement component. However, there was no provision for equipment rental in the loan agreements. This oversight was discovered only after the loan closing date, so no amendment was made. Instead, overdrawing the relevant disbursement category was authorized through a waiver given by the Loan Department.
2.5 Post-completion Operation/ Phase
Agencies that owned assets constructed under the project, have been organized with adequate staffing and budget to cover operation and maintenance expenditures. NSC and GSC have established systems, staff and budgets to meet all operating requirements. The one exception was the Nanning Water Resources Bureau which did not have adequate funding to operate the pump station to refresh the Chaoyang Stream. The ICR mission received assurances from the Nanning Municipal Government that this matter would be addressed as a priority. NSC and GSC would continue to use the financial systems and monitoring procedures developed during the project using some of the key performance indicators. It would be appropriate for the Bank to follow up on the above matters, especially in the NSC and GSC during the proposed Bank’s follow-on sewerage project.
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The operational performance system developed for the Langdong STP, which was awarded “Class A Qualification for Operation of Environmental Protection Facilities”, will also be adopted for operation of the Jiangnan STP.
Future plans of the government and utility companies are as follows: (i) NSC: expansion of the treatment capacity by another 240,000 m3/d (Jiangnan II); construction of the sludge digesters deferred under the Project, development of a sludge management plan, and access to market finance (in the stock exchange) by Nanning Water Services Group, the holding company of NSC; (ii) NMG: resolution of the budgetary constraint that limited the pumping of clean water to maintain flow and water quality in the lower part of Chaoyang Stream; (iii) GSC: continuation of investments to intercept wastewater entering water bodies and expand the sewer network; and generation of adequate operating revenues from tariffs, subject to approval of the Municipal Government; (iv) Guilin Solid Waste Management: construction of the second phase of the solid waste landfill by about 2010, at a different location due to difficulties in land acquisition and/or objections from the local government, thereby forgoing projected economies of its construction adjacent to the original landfill, as planned originally; (v) Nanning and Guilin: continuation of the participatory Small Area Improvement program under the title of ‘Small Streets Development Program’ in areas not earmarked for redevelopment in the urban development master plans; and (vi) Guangxi Autonomous Region: explore ways to replicate the experience gained in the sugar refinery pilot initiative undertaken under the Project.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
Rating: Satisfactory
The two objectives of arresting deterioration in the level of pollution in the Region, and maintaining the relatively better water quality in the river systems to promote sustainable economic development of the two key cities of Nanning and Guilin, were highly appropriate to maintain the competitiveness of the two cities and sustain growth. Improved water quality, and water depth in the river systems were crucial for sustainable tourism and economic development in Guilin. Coordinated development of wastewater treatment and collection assured capacity utilization and pollution reduction. Reviving poor neighborhoods using a participatory development approach, with communities sharing costs to generate economic opportunities, helping reduce poverty, and providing an alternative to total redevelopment avoiding significant social costs, was a commendable innovation. Definition of revenue of sewerage companies as income from operations only, was a significant positive step towards promoting real sustainability of wastewater services. The pilot intervention to reduce sugar industry pollution addressed the largest polluting industry through demonstrating options for wastewater treatment. Incorporation of an industry pollution reduction program in Nanning complemented project investments in municipal wastewater collection and treatment. Some project design aspects such as the capacity of the Nanning wastewater treatment plant and the Guilin solid waste management were not finalized at appraisal because weaknesses in the feasibility studies, and lack of agreement on wastewater and solid waste projections. Project design also addressed water resources management in the Lijiang basin through a proposal to create a broad- based water resources management commission, which proved to be an ambitious objective. The Project did not include technical assistance for detailed design and construction supervision, which was standard in China projects. Project implementation took three years longer than anticipated at appraisal. The overall project development objectives and specific objectives were relevant, and very appropriate to address the environmental issues facing the two key cities and the Region.
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3.2 Achievement of Project Development Objectives Rating: Satisfactory
(a) Water Quality Improvement. Water quality improvements were achieved: in Nanning: Chaoyang Stream improved to Class IV (compared to the target of Class V); the Yongjiang maintained at Class III; and in Guilin: the Lijiang maintained at Class II; and Taohuajiang, Xiadongjiang and the Three Lakes improved to Class III. Thus, water quality objectives set out in the SAR were fully achieved as projected, and the outcome is rated highly satisfactory. Water quality improvements are illustrated in Annex 1.
(b) Lijiang Flow Regulation. Flow in the Lijiang was increased and maintained at 35 m3/sec in the dry season, and a water depth of 2.5 meters was restored in the Three Lakes, enabling all tourist boat traffic to operate without interruption. This outcome is rated highly satisfactory.
(c) Wastewater and Solid Waste Management. Wastewater treatment rates of about 67% (440,000 m3/d) and 81% (228,500 m3/d) were achieved in Nanning and Guilin, respectively, thereby improving pollution reduction and water quality, and contributing to improved public health. Over 90% of solid waste generated in Guilin (about 500 tons/day) was collected and disposed in a satisfactory manner, thereby reducing pollution of land and water from this source. The outcome is highly satisfactory.
(d) Small Area Improvement. The component was singularly successful in: improving the environment in the poor, under-serviced neighborhoods; reviving neighborhoods; increasing incomes and property rentals, and supporting economic regeneration of the areas, thereby contributing to poverty reduction; and introducing a participatory development approach that demonstrated the willingness and feasibility of mobilizing communities to actively participate in the development of their neighborhoods, with cost sharing. This approach was an alternative to wholesale redevelopment without large expenditure and dislocation of communities. Importantly, the component influenced government policy leading to the adoption of this approach in many more areas in both Nanning and Guilin (called the ‘Small Streets Program’). The use of social workers to work with communities to enhance the level of participation and consultation, and the design of subprojects to meet local needs, was a great success. The environmental improvements have contributed significantly to economic revival and regeneration of the neighborhoods. The achievement is rated highly satisfactory.
(f) Sugar Industry Pollution Abatement. The successfully implemented pilots demonstrated options for reducing pollution at sugar refineries, but their replication across the GAR has been difficult because of moves in China to consolidate smaller sugar refineries. Therefore, the intended outcome could not be realized.
(g) Industry Pollution Reduction. Pollution reduction from industry and water quality improvements were achieved through the successful implementation of the Nanning industry pollution reduction plan, targeting over 240 industries, including the 33 worst polluters identified at project appraisal, contributing to reducing the total pollution load that was discharged to water bodies before the project. This outcome is rated highly satisfactory.
(h) Institutional Development. Significant progress was made towards strengthening the sewerage companies. At the end of the project, they were well-managed, enjoyed a substantial degree of autonomy, with control of revenue, ownership of assets, and substantial cost recovery, thereby contributing to improving sustainability of the sector. Nanning Sewerage Company (NSC) was in compliance with the
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financial covenants throughout the Project and is fully autonomous; Guilin Sewerage Company (GSC) required government subsidies to meet a portion of its financing costs. The institutional development objective was partially achieved.
(i) Water Resources Management. The Guilin Municipal Government established the Office for Integrated Construction and Management of the Lijiang Scenic Area, with responsibility for coordinating the quantity and quality of water in the Lijiang during the dry season. Under this arrangement, the short- term objective of coordinating water uses, maintaining the necessary flow in the Lijiang, and replenishing the Three Lakes to maintain the minimum water depth required for boat traffic, was achieved. The longer- term objective of comprehensive water resources management in the Lijiang basin was yet to be achieved at Project closure.
Project investments in both Nanning and Guilin contributed significantly to the improvement of the urban environment. They also helped Nanning to win an award as the national Livable City (Model City for Excellence in Water and Environment Improvement) in 2006, and the UN Livable City in 2007. Nanning was also cited by the World Bank as a model for other Chinese cities to follow, at the International Water Association Conference held in Beijing in September 2006.
3.3 Efficiency Rating: Satisfactory
Financial - The NSC is likely to generate financial rates of return above the costs of capital for the sewerage component. The rate of return results from the fact that the project costs for the components was effectively controlled. Current revenues of the GSC are inadequate to meet its total operating and financing costs, and the company is still subsidized by the Guilin Municipality. GSC made annual tariff increase recommendations to GM following preparation of financial projections. GM was constrained to approve these tariff increases because of national directives that sought to contain inflationary pressures. However, GSC plans to prepare and implement, with GM support, a program over the next three years to achieve sustainability, in a phased manner. In order to continue to achieve and maintain financial sustainability, both NSC and GSC will need to increase the wastewater tariffs in the next five years, as indicated in the financial projections. Implementation of tariff increases depend largely on the National Government’s continuing policy guidelines promoting full cost recovery in wastewater services, and local government’s willingness to comply with the guidelines. Financial projections for NSC and GSC are provided in Annex 5.
Economic - At appraisal, the economic benefits of the wastewater components were analyzed on the basis of least costs. For the Guilin wastewater component, which included only networks, data was not readily available and economic benefits were not quantified. Least cost options were selected by evaluating a number of alternatives options, including: primary or secondary treatment; staged construction of treatment capacity; utilization of existing treatment capacity rather than adding new capacity; alternative locations for facilities and alignments of pipelines; operating costs, etc. The Small Area Improvement component generated significant economic benefits through: improved environmental conditions and urban regeneration, increased land values, higher rentals for commercial and residential properties, and generally increased economic activity. A sample survey of the Jiangzheng SAI area in Nanning indicates that per capita income increased from RMB831 in 1997 to RMB2.030 in 2006 (see Annex 5 for more details).
All planned physical outputs were achieved in Nanning; and most outputs planned in Guilin were also
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realized. In addition, significant additional investments were made, all within the original project cost estimate. Thus, all anticipated economic benefits identified at appraisal, and more, were achieved for less.
Indirect economic benefits from the project include: (a) improved public health in the urban areas of Nanning served by the project as a result of improved wastewater collection, treatment and disposal; (b) increased land values in the central area of Nanning along and around the Chaoyang stream; (c) permanent and temporary job creation on which normal economic multipliers can be applied; (d) potential savings by industries now discharging through municipal sewers to centralized wastewater treatment plants, rather than operate costly onsite treatment facilities; and (e) local health, quality of life, employment generation, increased property values and rentals and other benefits from the regeneration of low-income urban pockets under the Small Area Improvement component. The project provided a major indirect economic benefit to Nanning and Guilin by facilitating the continued economic growth, urban development, and tourism (in the case of Guilin) in an environmentally sustainable manner. Tourism revenues in Guilin increased nearly threefold, from about US$0.39 billion in 1998 to US$1.1 billion in 2007, and it is very likely that the project improvements contributed in some measure to this success.
3.4 Justification of Overall Outcome Rating Rating: Satisfactory
The outcome rating is assessed as ‘satisfactory’ in view of the: (a) the relevance of objectives, design and implementation; full achievement of water quality objectives for the Yongjiang, Lijiang and its tributaries, and the Three Lakes; flow regulation in the Lijiang and the Three Lakes that enabled maintenance of the specified flow in the Lijiang and water depth in the Three Lakes; revitalization and improvement of economic opportunities in low-income neighborhoods in both Nanning and Guilin, which contributed to poverty reduction; and successful implementation by Nanning of the industry pollution control plan that enabled improvement in the environment and development of the areas around the Chaoyang Stream; and (b) achievement of full financial viability in NSC, and partial financial viability in GSC, and short-term water resources management in the Lijiang basin, although the broader water resources management objective for the Lijiang basin was not achieved.
The Borrower feels that the project outcomes merit a ‘highly satisfactory’ rating in view of the many successful outcomes of the project. Most of the outcomes were fully achieved, and a lot of credit is due to NM, GM, NSC, GSC and other implementing agencies. However, the overall outcome rating of ‘satisfactory’ is justified because of the partial achievement of planned institutional developments.
3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development
(i) The Small Area Improvement component was highly successful in mobilizing communities to participate in the selection and implementation of neighborhood infrastructure in poor under-serviced areas in the urban core and adjacent peripheral areas, using facilitators (NGOs) from social science institutes and the neighborhood committees. The transformation in the environment has contributed significantly to revive these neighborhoods economically, raise incomes and reduce poverty. This pilot demonstrated the willingness and feasibility of mobilizing communities to actively participate in development of their communities with cost sharing, and an alternative model for in situ improvement of neighborhoods without wholesale redevelopment, avoiding large expenditure and no dislocation of
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communities.
(ii) Institutional Change/Strengthening The Project introduced four important interventions with regard to institutional changes/strengthening of wastewater companies through: enhancement of the degree of autonomy, direct control of all revenue without passing through the Finance Bureaus, ownership of all assets, and improved financial management systems and procedures, including enterprise accounting and financial planning capabilities. One of the two utility companies (i.e., NSC) achieved and maintained financial viability throughout the project period, and is highly likely to achieve sustainability in the short-term (see Annex 5). The financial viability achieved by NSC, and the control of all revenue and ownership of all assets by both NSC and GSC were commendable achievements, quite unusual for China.
(b) Other Unintended Outcomes and Impacts (positive or negative, if any)
An unintended but highly positive outcome was the adoption and expansion of the pioneering participatory development approach of the Small Area Improvement component, under the name “Small Streets Improvement Program” in Nanning and Guilin in 300 and 100 areas, respectively, under the Small Street Improvement Programs. Another unintended outcome was the supply of water to villages along the Lijiang diversion canal following local demands and opposition to water diversion from the Lijiang to the Three Lakes.
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable
4. Assessment of Risk to Development Outcome Rating : Low
The risks to development outcome are assessed as ‘low’ due to the following factors:
(a) Maintaining Water Quality in the Chaoyang Stream. The dedicated pump station to refresh the Stream did not work regularly in 2007 due to lack of adequate budget in the Nanning Water Resources Bureau. Given Nanning’s strong case to become a ‘green’ city, NM has assured the Bank that arrangements to provide a regular budget to cover the operating costs of the pump station will be addressed as a priority matter. Given the public visibility of this operation, and the small costs involved, it is likely that the necessary budget will provided, the risk is assessed as ‘moderate’.
(b) Financial Viability of NSC and GSC. NSC is financially viable at present, but tariffs are low in Guilin, which has required subsidies. In an effort to contain inflation, GM has continued to provide subsidies to GSC, with a plan to support GSC to achieve sustainability in phased manner. Due to the importance of tourism to the economy (and hence the environment) of Guilin, GM will provide financial support to GSC until its tariff is increased. In addition, both NM and GM have assured that they will comply with the central government guideline for a minimum tariff of Y0.80/m3. Also both NM and GM increased tariffs during project implementation at a faster rate than stated in the SAR. Thus, the risk to achieving financial viability is assessed as ‘low’ in both Nanning, and Guilin.
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(c) Water Quality in the Three Lakes. Guilin is continuing its program to intercept all wastewater discharged to the Lakes, and no wastewater is now discharged directly to the Lakes. GM is unlikely to risk any action that will harm the tourism industry. The risk is assessed as ‘low’.
(d) Industry Pollution Control. The regional government is continuing its industrial pollution reduction program, plans to introduce mandatory online water quality monitoring in industries, and increase its monitoring and enforcement of environmental regulations. In addition, both Nanning and Guilin have ongoing industrial pollution reduction programs. Based on improvements made in industrial pollution control over the past 10 years, the high priority now afforded by national government to the environment, and arrangements already in place, the risk is assessed as ‘low’.
(e) Solid Waste Management. Guilin’s solid waste disposal has transitioned from composting to a sanitary landfill operation. The landfill constructed under the project will be full by about next year. The construction of the second phase adjacent to the current site has suffered a setback due to opposition from the local government. GM is in the process of finalizing acquisition of alternative land for construction of the second landfill. The risk to maintaining the level of performance of the service is considered ‘low’.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating : Satisfactory
Project preparation was very comprehensive in conceptualization, attention to overall design and details, implementation arrangements and definition of detailed performance indicators for each component. The level of detail provided in the SAR is of a significantly higher quality than what is found in most SARs of this vintage. The participatory development model in low-income neighborhoods was a pioneering initiative. Long-term sustainability was addressed through interventions in institutional development, financial management, capacity building, and pollution control. The task team was highly professional in its pursuit of introducing new design concepts and utility management practices. The Guilin component had many subcomponents, which was a challenge for the city to manage. Yet, most outputs were substantially achieved by loan closure with a three-year extension, except for establishment of the regional water commission for the Lijiang. Inclusion of technical assistance for detailed design and project management would have complemented the relatively weak institutional capacity.
The Bank decision at appraisal, to finance only a 180,000 m3/d STP in Nanning, instead of 240,000 m3/d was reasonable because wastewater projections were unreliable, the feasibility study was weak, the collection network was not adequately developed, and the Bank had concerns about creating excess treatment capacity. This conservative approach was appropriate because of the underutilization of treatment capacity worldwide. The expectation to create a regional water commission based on the relatively limited objective of maintaining minimum flow in the Lijiang was ambitious. The sugar industry pollution pilot lacked sufficient leverage to make a significant impact.
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(b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory
The semi-annual supervision and comprehensive back-to-office reports facilitated project implementation monitoring, and kept Bank management informed of the problems, especially when it was a problem project from March to December 2001. Relations with the client were somewhat difficult in the early years, because implementing agencies needed more convincing on improvements to detailed designs and related technical matters. The transfer of task team leadership to an experienced national staff from the Beijing office helped to resolve outstanding issues and improve relations with the client. This move by Bank management was timely, and was well received by the implementing agencies. Delegation to the Country Office of responsibilities for supervision of procurement, safeguard issues and financial management also contributed to improved efficiency in these areas.
The task team specialists made significant contributions to: apprise implementing agencies on Bank procedures, practices and requirements; assist and guide implementing agencies on advances in technical design; maintain borrower’s focus to comply with the project covenants; ensure sound financial management, improve procurement performance, and introduce international utility management practices. The task team took great pains to encourage good technical designs consistent with good international practice, and also facilitated the introduction of the pipe-jacking technique to accelerate pipe-laying. Against this achievement, the task team spent a great deal of time to reach agreement with implementing agencies on matters such as the capacity of the Nanning STP, wastewater treatment standards, and introduction of turnkey contracting, contributing to a two year delay. The issue of centrally prescribed wastewater treatment standard should have been taken up with SEPA rather than with Nanning. Some flexibility and willingness to compromise by the Bank would have facilitated completion nearer to the original closing date.
Working proactively with the Borrower, the Bank provided extensions of the loan closing date totaling three years. The Bank also processed the Borrower’s request for use of loan savings, primarily to expand wastewater facilities in the two cities, and to increase the disbursement percentage for civil works.
Quality of Supervision Assessment (QSA) Results. QAG reviewed quality of supervision over 2003- 2004. Overall, supervision performance was found to be satisfactory. The task team was advised to: (i) expedite decision to extend loan closing date to enable completion of all components; (ii) undertake a quantitative assessment of the progress made in water quality of the Provinces’ main water bodies, and also in reference to the performance indicators in the SAR; (iii) use the findings to outline a strategy for the Province to bring about further gains in environmental quality. The panel noted the need for expeditious management follow-up after supervision missions; delays of 2-3 months occurred between supervision missions and follow up letters.
Fiduciary Compliance Rating: Satisfactory
Procurement. The Country Office procurement specialists maintained close overview of procurement, and
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were available to assist and clarify procurement-related issues to the implementing agencies. Post reviews were carried out on a random basis. These oversight functions were carried out efficiently and satisfactorily.
Financial Management. Financial management supervision and overview was done by the Country Office FM staff. The FM Unit monitored submission of audit reports, and reviewed disbursements. These oversight functions were carried out satisfactorily.
Safeguards Compliance Rating: Satisfactory
Bank supervision missions ensured that project agencies followed the agreed resettlement action plans (RAP) and the environmental management plan (EMP). In addition to the formal missions, the Bank’s Country Office staff conducted monitoring and supervision of safeguards implementation. Bank performance in this area was carried out satisfactorily.
(c) Justification of Rating for Overall Bank Performance Rating: Satisfactory
(a) Quality at Entry. Project concepts and preparation were consistent with the CAS, and addressed the key environmental issues of the Region and two key cities, as well as sustainability. The Project introduced an innovative participatory approach to infrastructure provision, which contributed significantly to economic regeneration of depressed neighborhoods, and introduced a viable alternative to redevelopment, and contributed to poverty alleviation. (b) Project Supervision. The quality and intensity of supervision kept the client focused on sound engineering and utility practices, and on meeting the legal covenants. There were instances of Bank staff micro managing implementation by the Bank, albeit in good faith, and included recommendations on minute design details. Supervision missions continually focused attention on measures necessary to secure the autonomy of the sewerage companies. Back-to-office reporting, bringing key implementation issues Bank management was thorough. Bank management agreed with the task team’s recommendation to downgrade the project and accommodated legitimate delays in implementation by agreeing to extend the loan closing date three times. The transfer of task management responsibility to a Country Office staff helped accelerate implementation and develop a cordial working relationship.
5.2 Borrower (a) Government Performance Rating: Satisfactory
The Guangxi Region government provided the necessary leadership and commitment to the project objectives. The municipal governments provided the necessary counterpart funds to facilitate project implementation in a timely manner. GM made the necessary changes in project management arrangements, transferring the overall responsibility from the EPB to the Development Reform Commission (DRC) in 2003, following which project implementation improved significantly. Despite weak project management, unfamiliarity with Bank requirements during the initial years, and time-
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consuming domestic approval procedures, all subprojects were completed satisfactorily, even though it took three years longer than originally planned.
Compared to other Chinese cities, Nanning Municipality (NM) and Guilin Municipality (GM) supported the greater degree of autonomy of wastewater companies by allowing wastewater companies to: retain all revenue without passing through Finance Bureaus, own all sewerage assets, and implement tariff increases. NM’s support enabled NSC to comply with the financial covenants of the project. Few projects in China can boast of these achievements. Despite GMs commitment to long-term sustainability, it adopted a more gradual phasing of tariff increases to recover full costs because of its stronger financial position. As a result, GSC did not comply with the project financial covenants throughout the Project.
The Guangxi Region and the Nanning Municipal Government implemented the agreed industrial pollution reduction plan very successfully, by improving industry wastewater management, restructuring and/or closing down of financially unviable enterprises, and relocating others. Guangxi Region, NM and GM also strengthened their monitoring and enforcement capacity of their EPBs, covering a larger number of industries. Overall, the Government performance is judged satisfactory.
Social Safeguards. The largest resettlement in Nanning was handled satisfactorily under the project, and was recognized as a model of resettlement. Independent monitoring reveals that resettlement implementation was completed successfully.
Environmental Management. An additional EA was prepared for the expanded capacity of the Nanning STP. The EMP was implemented satisfactorily in the course of project implementation.
Financial Management. Audit requirements for the consolidated project accounts and accounts of NSC and GSC were fully complied with.
Procurement. Procurement activities were conducted satisfactorily despite time required by implementing agencies to become fully familiar with Bank procurement procedures. Ultimately, implementing agencies recognized the efficiencies and cost savings that resulted from the use of Bank procurement procedures..
(b) Implementing Agency or Agencies Performance Rating: Satisfactory
Implementing Performance Agency Highly Satisfactory. Design, construction, operation of facilities, and compliance with financial covenants were highly satisfactory. With the formation of the larger water NSC group responsible for water supply and sewerage, the water sector is on the road to greater autonomy. Satisfactory. GSC has made good progress in intercepting and collecting wastewater generated in the city, which has contributed to making Guilin a popular tourist resort. It GSC has continued to strengthen, and has built up a cadre of experienced staff and management. Guilin Highly Satisfactory. Works relating to the Lijiang flow regulation, dredging of the Three Municipality Lakes, and highly successful landscaping (with own financing) were completed early in
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the project, contributing substantially to tourism development in Guilin. Satisfactory. Capacity for monitoring and enforcement were enhanced with project Guangxi EPB technical assistance. Satisfactory. Nanning enhanced its monitoring and enforcement capacity using project Nanning EPB technical assistance. Satisfactory. Capacity for monitoring and enforcement was enhanced with project Guilin EPB technical assistance.
(c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory
The Guangxi Regional Government and the two municipal governments were committed to the project objectives, and completed all the subprojects. GM made changes to project management arrangements to rectify slow implementation progress. The Municipal Governments supported the strengthening of the wastewater companies. All implementing agencies performed satisfactorily, including complying with the Bank’s requirements for safeguards, financial management and procurement.
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6. Lessons Learned (both project-specific and of wide general application) (i) When planning water transmission for city uses through rural areas, engineers need to consider the needs of local farmers and rural populations en route, to provide some benefits to them also. The duplication of the Lijiang water diversion canal, providing water for rural populations and local farmers, was ultimately necessary overcome their initial opposition.. (ii) Water quality improvements cannot succeed through collection and treatment of domestic wastewater alone. Complementary industrial pollution reduction programs are necessary to achieve water quality objectives. (iii) Community participation in infrastructure planning, implementation and management is a viable and socially acceptable alternative to redevelopment even in rapidly growing cities. The SAI component demonstrated the feasibility of proactive community participation, cost sharing, empowerment and poverty alleviation. (iv) Significant benefits accrue to the Bank and to clients by including experienced national staff from the Country Office in the task teams; borrowers are able to get quicker responses, and the language barrier is reduced. The transfer of task manager responsibility to the national Country Office staff in 2002 significantly improved the dialogue with the Borrower, and facilitated the accelerated implementation of the Project. (v) Improvements are necessary in the Chinese practice of adopting short duration contracts (12-15 months) with no provision for price escalation, as contractors have experienced price fluctuations that cannot be accommodated. In the absence of such provisions, contractors would be forced to compromise on quality. The Country Procurement Unit needs to address this issue. (vi) The time taken for approval of ICB equipment contracts is very long, and delays implementation. This requirement affects all World Bank-financed projects in China, and ways need to be found to improve this situation through policy dialogue with the central government. (vii) Introduction of new contracting methods, such as turnkey contracting, should be done after model bidding documents have been introduced, or after standard documents have been thoroughly discussed and understood during project preparation.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower’s Comments on the Bank ICR
The Borrower has stated that the Bank ICR rating of ‘satisfactory’ for Achievement of Outcomes is inaccurate and unfair in view of the achievements, rather the rating should be ‘highly satisfactory’ for the following reasons:
The Borrower believes that outcomes deserve a ‘highly satisfactory’ rating because the following were achieved: (i) target water quality objectives in Nanning and Guilin despite the increasing urban population; (ii) improved wastewater collection and full utilization of the expanded wastewater treatment plant with full secondary treatment standard (in Nanning); (iii) the water quality improvement in the Chaoyang Stream to Class IV, leading to a significant economic regeneration of the whole area, increased in property values, and initiatives by NM to address water quality in other water bodies; (iv) removal of the environmental embarrassment of polluted and smelly water bodies in the tourist resort city of Guilin; (v) the highly successful small area improvements using the participatory model, leading to its
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institutionalization in both NM and GM; (vi) effective control of industrial pollution in Nanning, developing pilots for sugar industry pollution reduction and strengthening the capacity for environmental monitoring; (vii) significant institutional reforms, especially in the utility companies; and (vii) greater economic benefits at the same cost.
Responding to the above comments, the ICR was revised to indicate elements of the project where achievement of outcomes is highly satisfactory. However, the Bank believes that an ‘satisfactory’ rating for overall achievement of outcomes is justified because: water quality in the Chaoyang Stream can be achieved only with a regular budget allocation for operating the dedicated pump station to refresh the Chaoyang Stream; despite assurances received from GM, wastewater tariffs in GSC are still not adequate to meet the test of financial viability; and the broader institutional arrangement for the Lijiang basin water resources management was only partially achieved.
(b) Bank Comments on the Borrower’s ICR The Borrower’s ICR alludes to three issues that created difficulties with the Bank in the early years of project implementation, especially in the Nanning sewerage component, that contributed to a delay of two years in completion.
(i) The time taken for the Bank to review Borrower’s reports to justify a larger capacity STP in Nanning is considered excessive. (ii) The Bank’s judgment, following model studies, that primary treatment was adequate for the Nanning STP was correct. Meanwhile SEPA had mandated full secondary treatment in all STPs discharging effluent to specific water bodies, based on national pollution load reduction policies. As a phased upgrading of treatment standard was not possible in the case of the Nanning STP, It was unrealistic and futile for the Bank to engage the implementing agency in long discussions to fight a national mandate on new treatment standards on which Nanning had no jurisdiction. (iii) Bank involvement contributed to value addition in the introduction of new management and procurement practices. Bank recommendation for use of a turnkey contract for the Nanning STP was appropriate. However, turnkey contracting was new to China, and the lack of a Bank model document compounded the challenges for NSC.
(c) Cofinanciers - Not Applicable
(d) Other partners and stakeholders - (e.g. NGOs/private sector/civil society) Not applicable
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Annex 1. Key Performance Indicators
A. Project Outcome Indicators
1. Overall Water Quality in Rivers and Key Water Bodies
All the main water courses impacted under the project now meet their target water quality classifications, as shown in Table 1.
Nanning. As illustrated in the following tables and graphic presentations, monitoring results indicate that water quality in upstream of the Yongjiang has remained stable while the water quality of Yongjiang River as a whole has not experienced major changes through these years though pollution caused by its tributaries has been reduced, particularly after the significant mitigation of pollution from 2002 onwards, initially through improved industrial pollution control, and from 2006 wastewater interception and conveyance. The water quality of Chaoyang Stream has been improved to meet Class IV standard for surface water through cleaning up (i.e., dredging), wastewater interception, and water replenishment through a dedicated clean water pumping station (operated from 2007). These outcomes have been achieved in the context of Nanning’s rapidly expanding urban population and economic growth over the project period.
Guilin. Water quality of the Lijiang has been maintained at Class II even in the dry season, and water quality in the tributaries has improved with the project interventions. Water quality in the Three Lakes also improved to Class III. Adequate flow in the Lijiang, and water depth in the Three Lakes were achieved enabling the operation of tourist boat traffic without interruption during low flow periods.
Table 1. Summary Water Quality Outcome Indicators*
Water Body Water Quality Classification Target ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Nanning Yongjiang III III-IV III III III III III III Chaoyang V >V >V >V >V >V >V IV Stream Guilin Lijiang II III II II II II II II II II II II II Three Lakes III III-IV III III (Gui, Rong & Sha) Lijiang Tributaries Taohuajiang IV II II III II III III II III III III III III Xiaodong R >V III III Nanxi R >V >V V Ningyaun R >V IV n/a
*See Attachment to this Annex for an explanatory note on water quality classifications, water quality parameters and designated uses.
2. Water Quality Parameters for the Yongjiang (Nanning)
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2.1 Yongjiang Dry Season Flows
Figure 1 below indicates the dry season flow in the Yongjiang (in March). With the exception of 1996, a 10 year history of water flow of the Yongjiang in dry seasons has remained relatively stable, averaging about 250 m3/s.In exceptional years, flows reduced to 40% of the average during the severe winter drought (1999) and the unseasonal early rainfall in 1996. The vulnerability of the Yongjiang to pollution from the urban area increased under low flow conditions, and especially so during periods of severe winter drought. The figure illustrates that there is no trend of adverse vulnerability to pollution as a result of reduced dry season flows.
Figure 1 below indicates the dry season flow in the Yongjiang (in March)
Fig.2 March River Flow Changes of Yongjiang River (1996~2004) 1600
1400
1200
1000 s
／ 800 3 m
600
400
200
0 Yr 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
2.2 Yongjiang Dissolved Oxygen (DO) Levels
As illustrated in Figure 2, DO levels are highest upstream of the urban area of Nanning and deteriorate progressively as the river flows through the urban area. DO levels at all urban locations show an improving trend despite there being no improvement in the upstream level. The impact of Jiangnan STP, which was commissioned in late 2007 will be seen at the Shutian and Pumiao monitoring points in due course. Locations of monitoring points are: Laokou - upstream of the main urban area; Dakengkou-in the urban area at the confluence of Chaoyang stream; Shutian River-immediately downstream of the main urban area and the outlet of Jiangnan STP; and Pumiao-approx 12 km downstream of the urban area.
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Figure 2. Changes of Dissolved Oxygen in Yongjiang River during Dry Seasons (1996~2007)
10 9 8 7 Laokou 6 Dakengkou 5
mg/L Shuitang River 4 Pumiao 3 2 1 0
6 7 8 9 0 1 4 5 6 7 0 0 0 0 199 199 199 199 200 200 2002 2003 20 20 20 20 Year
2.3 Yongjiang Permanganate Index
The permanganate index is a measure of organic pollution in the river and therefore closely associated with pollution from industrial sources. Figure 3 shows a trend of improvement in the index at all locations. The erratic levels of the index at Dakengkou up to 2001 (at the confluence of the Chaoyang Stream and the Yongjiang) are attributed to industrial discharges into Chaoyang stream, which were effectively brought under control in late 2001.
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Figure 3. Changes of Permanganate Index in Yongjiang River during Dry Seasons (1996~2007)
30
25
20 Laokou Dakengkou 15
mg/L Shuitang River 10 Pumiao
5
0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year
3. Water Quality Parameters for the Chaoyang Stream
Figure 4 shows the trend of BOD changes in the Chaoyang Stream during the period 1997- 2006. January 2008 water quality data indicates that the Chaoyang Stream, with regular refreshing form the Yongjiang, meets Class IV standard. Recorded levels of parameters are: DO- 7.0mg/l, COD- 10mg/l, ammonia nitrogen- 1.11mg/l and BOD5- 2mg/l. The figure shows that the quality of the stream has been substantially and progressively improved since 1997, resulting from dredging, wastewater interception and improved industrial pollution control.
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Figure 4. Change of BOD in Chaoyang Stream (1997-2006)
600
500
400 Xiping Bridge 300 Nanmian Bridge mg/L Chaoyang Stream 200
100
0
6 7 8 9 0 1 2 3 4 5 6 7 9 0 0 0 0 0 199 199 199 19 20 20 20 20 20 200 200 200 Year
4. Water Quality Parameters for the Lijiang, Taohuajiang Tributary and the Three Lakes (Guilin)
Figures 5, 6, 7, 8 and 9 illustrate the annual changes in water quality parameters for the Lijiang (1996- 2007) for dissolved oxygen (DO), COD and BOD in the Lijiang, the Taohuajiang Tributary and the Three Lakes (Rong, Gui and Sha), respectively.
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Figure 5. Lijiang Water Quality Parameters (1997~2007)
9.0
8.0
7.0
6.0 DO 5.0 CODmn mg/L 4.0 BOD5 3.0
2.0
1.0
0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year
Figure 6. Taohuajiang Water Quality Parameters (1996-2007
8.0
7.0
6.0
5.0 DO 4.0 CODmn mg/L BOD5 3.0
2.0
1.0
0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year
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Figure 7. Rong Lake Water Quality Parameters (1996~2007)
10.0 9.0 8.0 7.0
6.0 DO 5.0 CODmn mg/L 4.0 BOD5 3.0 2.0 1.0 0.0 1996 1997 1998 1999 2002 2003 2004 2005 2006 2007 Year
Figure 8. Gui Lake Water Quality Parameters (1996~2007)
8.0
7.0
6.0
5.0 DO 4.0 CODmn mg/L BOD5 3.0
2.0
1.0
0.0 1996 1997 1998 1999 2002 2003 2004 2005 2006 2007 Year
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Figure 9. Sha Lake Water Quality Indicators 1996~2007
12.0
10.0
8.0 DO 6.0 CODmn mg/L BOD5 4.0
2.0
0.0 1996 1997 1998 1999 2002 2003 2004 2005 2006 2007 Year
5. Water Flow Regulation in the Lijiang
Table 2 indicates the achievement of the minimum flow n the Lijiang to facilitate uninterrupted tourist boat traffic during the dry seasons.
Table 2. Guilin: Lijiang Flow Regulation: Monitoring Indicators
Indicator Unit ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Flow rate (t) m3/sec 30 30 30 30 30 32 35 (actual) 30 30 30 30 30 35 37.5 37.5 37.5 37.5 37.5 Minimum % frequency of 93.8 93.8 93.8 93.8 93.8 93.8 94 95 96 achieving 93.8 93.8 93.8 93.8 93.8 93.8 90 91 96 96 96 96 flow rate (t) (actual) Extension of Km 0 0 5 10 15 20 30 40 50 embankment n/a n/a n/a n/a 5.64 20.79 20.79 n/a n/a 20.79 31.93 n/a wall (t) (actual) Reforested Hectare 0 0 100 100 200 700 1000 1500 2200 areas (t) n/a n/a n/a n/a 720 n/a 1500 n/a 2400 (actual)
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B. Project Output Indicators
1. Table 3 indicates the quality of treated effluent at the Jiangnan STP in Nanning.
Table 3. Treated Water Quality of Effluent from Jiangnan STP
COD BOD5 SS TP TN NH3-N Influent 131 40.9 84 2.6 26 21.4 Effluent 17.8 3.09 14 1.4 18.36 2.03
National Standard 60 20 20 1 20 8 Notes: Units- mg/l; Monitoring was conducted in Oct. 2007.
2. Table 4 indicates the output performance indicators for Jiangnan (Nanning) and Beichong (Guilin) STPs.
Table 4. Sewage Treatment Plants: Output Indicators
Indicator Targets for Year 2002 Max BOD5 Max COD Max SS Nanning: Jiangnan (t)* 30 100 70 (actual) (mg/l) 5 21.5 16.3 Guilin: Beichong (t) 60 110 100 (actual) 12 40.8 29 Guilin: Xicheng STP effluent (t) 30 120 30 (actual) [Not completed] n/a n/a n/a *t = target
The above tables demonstrate that both STPs are currently achieving the original targets, and in the case of Jiangnan, the higher standard now imposed.
3. Performance of the Guilin Chongkou Solid Waste Landfill
Table 5 indicates the data on ground and surface water quality parameters downstream of the Chongkou solid waste landfill.
Table 5. Ground and Surface Water Quality Downstream of the Landfill
Indicator Unit ‘96 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07
Guilin Chongkou Landfill (downstream of site) Groundwater – pH (t)* - 6.5/8.5 6.5/8.5 6.5/8.5 - - - P pH (actual) - 7.23 - 7.25/8.08 7.2/7.93 7.24/7.52 7.19/7.96
Groundwater- max. total SS (t) - 25 25 25 - - - P mg/l (actual) - n/a n/a n/a n/a n/a n/a
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Surface water-pH (t) - 6.8/7.5 6.8/7.5 6.8/7.5 6.8/7.5 - - P pH (actual) - 7.91 n/a 7.4/8.0 7.29/7.81 7.23/7.52 7.25/8.01 Surface water- max. total SS (t) - 20 20 20 - - - P mg/l (actual) - 19 - 21/76 30/82 n/a n/a *t = target 4. Financial Indicators for Wastewater Companies
Table 6 illustrates the financial performance of the Nanning and Guilin Sewerage Companies
Table 6. Financial Performance Indicators
Indicator Unit ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Nanning Sewerage Company Debt Service P % 100 100 100 100 100 100 100 100 100 - - - Coverage (t) (actual) － － － － － － － － － 100 100 100 Ratio of revenue S % 85 85 85 85 85 85 85 85 85 85 85 85 collection to billed － － － － － － － － － 90 90 90 amount (incl. users of self- extracted water) (t) (actual) Guilin Sewerage Company Debt Service P % 100 100 100 100 100 100 100 100 100 - - - Coverage (t) 100 100 100 100 10 100 100 100 100 100 100 100 (actual) Ratio of revenue collection to S % 85 85 85 85 85 85 85 85 85 85 85 85 billed n/a n/a n/a n/a 94 94 94 99.4 99.4 99.4 99.4 99.4 amount (incl. users of self- extracted water) (t) (actual)
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Attachment to Annex 1
Explanatory Note on Water Quality Classifications, Water Quality Parameters and Designated Uses
Water Quality Classifications. Surface water quality in China is classified under the Environmental Quality Standard for Surface Water issued by the State Environmental Protection Administration in April 2002, as follows:
Class I Naturally unpolluted and specific nationally designated water sources Class II Water bodies designated as Class A, protection areas for potable water use, habitat of rare aquatic organism, spawning grounds of fish and shrimp, and feeding grounds of young fish Class III Water bodies designated as Class B protection areas for potable water use, fishing areas including winter grounds and migration channels of fish and shrimp, and aquatic plants, and swimming areas Class IV Water bodies designated for general industrial use and recreation without direct contact with human skin Class V Water suitable for agriculture use and general irrigation/landscaping use
Water Quality Parameters. Whether a water body meets the classification is determined by a number of parameters. Key parameters include: pH, dissolved oxygen (DO), permanganate index, COD, BOD5, ammonia nitrogen (NH3-N), total phosphorus (P) and total ammonia (NH3. The table below indicates the limiting values of parameters applicable to the different classifications. Designated sources of water for potable use must achieve at least Class III. Ideally, water sources for major cities should reach Class II. Targets are set based in the intended water use and the location.
Limiting Values of Key Water Quality Parameters for Surface Water
No. Clarification
Standard Class I Class II Class III Class IV Class V
Item 1 Water Water temperature variation caused by factitious environment should be temperature limited in the range of: (C) Max. Weekly Average Temperature Rise 1 Max. Weekly Average Temperature Drop 2
2 pH 6-9 3 DO Saturation 6 5 3 2 factor 90% (or 7.5) 4 Permanganate 2 4 6 10 15 index 5 COD 15 15 20 30 40 6 BOD5 3 3 4 6 10 7 NH3-N 0.15 0.5 1.0 1.5 2.0 8 Total P 0.02 (0.01 0.1 (0.025 0.2 (0.05 for 0.3 (0.1 for 0.4 (0.2 for for lakes and for lakes and lakes and lakes and lakes and reservoirs) reservoirs) reservoirs) reservoirs) reservoirs) 9 Total NH3 0.2 0.5 1.0 1.5 2.0
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Annex 2. (a) Project Cost by Component (in USD Million equivalent)
Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Sewerage and Drainage in Nanning 64.1 65.8 103% Sewerage and Solid Waste 37.6 37.6 100% Management in Guilin Small Area Improvement 7.3 10.5 144% Lijiang Flow Regulation 18.0 17.2 96% Sugar Industry Pollution Abatement 4.1 5.0 122% Institutional Development 5.4 3.8 70%
Total Baseline Cost 136.5 139.3 103% Physical Contingencies 19.8 Price Contingencies 12.2 Total Project Costs 168.5 76%
(b) Project Cost (Actual) by Agency (USD Million)
Components Nanning Guilin Guangxi Region SAR Actual SAR Actual SAR Actual Sewerage & Drainage (Nanning) 79.88 68.4 - - - - Sewerage & Drainage (Guilin) - - 35.96 53.5* - - Solid Waste Management - - 9.74 - - - Small Area Improvement 5.78 7.6 3.43 3.2 - -
Lijiang Flow Regulation - - - - 23.09 21.6** Sugar Industry Pollution Abatement - - - - 4.99 5.0 Institutional Strengthening 2.52 1.3 1.75 2.9 1.20 - Total Cost by Component 88.18 77.3 50.89 59.6 29.29 26.6 Total Project Cost in SAR 168.4 Total Project Cost – Actual 163.5
* Includes sewerage and solid wastes components. **Includes institutional strengthening for Guangxi Region EPB
(c) Financing (b) Project Cost (Actual) by Agency
Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate (USD Cofinancing Appraisal (USD M) M) BORROWER/GUANGXI 76.40 85.75 112% IMPLEMENTING AGENCIES INTERNATIONAL BANK FOR RECONSTRUCTION AND 72.00 58.29 81% DEVELOPMENT INTERNATIONAL 20.00 19.46 97% DEVELOPMENT ASSOCIATION TOTAL 168.40 163.50 97%
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(d) Disbursement Profile
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Annex 3. Outputs by Component
Nanning Sewerage and Drainage. Sewerage and Drainage. Outputs from this component are: (a) a 240,000 m3/d STP at Jiangnan; (b) expanded sewers and storm drainage network, including about 67.5 km of trunk mains, collection sewers and storm drains; (c) a 240,000 m3/d sewage pumping station, a storm water pumping station of 24 m3/sec capacity at Dakengkou, and a separate pumping station to refresh water in the Chaoyang Stream. With the completion of the sewers and treatment plants, including the Langdong STP (200,000 m3day) constructed with other funding, wastewater treatment has reached about 80% (440,000 m3/day), covering an area of 37 km2 area. Interceptors were constructed along Chaoyang Stream to capture sewage discharges, and the Stream was dredged to remove about 222,000 m3 of accumulated sediment. Cleaning up the Chaoyang Stream and refreshing the flow from a dedicated fresh water pumping station have helped eliminate the serious environmental situation that existed before the project, and improve water quality to Class IV. The sewage treatment facility is serving a population of about 430,000, and the Chaoyang Stream clean-up benefited about 270,000 residents by improving the immediate environment, reducing the stench and providing a better living environment. Nightsoil management Purchase of 19 tanker trucks and other vehicles and equipment to improve service quality, septic tank cleaning frequency, and serve an extended area.
Nanning Small Area Improvement. Specific outputs included: 272,000m2 of local roads; 77.7km of sewers and drains.; 23.4 km of water supply pipes; public toilets; and solid waste collection points in 27 poor un-serviced neighborhoods, serving about 140,000 residents (against about 40,000 beneficiaries planned). These improvements have revived the neighborhoods and increased the income opportunities of the residents, who were able to engage in trading activities, rent shop and residential space at enhanced rents.
Guilin Sewerage and Solid Waste Management Sewerage. Outputs of the Guilin components included: (a) pipelines to intercept wastewater discharges to the Taohuijiang tributary, to convey to the Beichong STP; (b) expansion of the Beichong STP by 30,000 m3/day to serve the northeastern catchment, including about 21 km of primary and secondary sewers, and interceptors along a 3.5 km long access road serving the new urban area; (c) 6 km of trunk sewers and 6 km of secondary sewers, including the Mantoushan pumping station to collect wastewater from the Qintan catchment; (d) a 2,500 m3/day oxidation ditch type STP and collection networks in Baisha (in Yongshou County); and (e) sewer networks to serve Xicheng2. These outputs resulted in improved wastewater collection in Guilin city, and collection and treatment of wastewater in County towns and reduced pollution discharges to the Lijiang and its tributaries. With the completion of the sewers and increased treatment capacity, wastewater treatment in Guilin has reached 81% \(228,500m3/day).
Solid Waste Management. Outputs include: a 400 tons/day sanitary landfill at Chongkou including leachate treatment, a transfer station with a capacity of 800 tons/day and a fleet of compactor vehicles to transport waste to the landfill. A fleet of vacuum tanker trucks was also procured to improve the servicing of septic tanks in Guilin.
2 The 30,000 m3/day STP constructed under a BOT is not a project output, as it was not supervised by the Bank. - 33 -
Lijiang (Guilin) Flow Regulation Outputs of this component were: (a) increased water depth in the Three Lakes to 2.5 m to facilitate tour boat traffic; (b) increased flow in the Lijiang to maintain a flow of 35 m3/sec to facilitate larger cruise boats; (c) diversion canal to convey water from the Wulixia reservoir to the Lijiang to maintain the required flow, also including a mini hydro power plant (of 0.8 MW capacity); (d) two diversion canals from the Lijiang – one to convey water (2.5 m3/sec) to the Three Lakes (of 400,000 km2 water surface) to maintain a water depth of 2.5 m for (tourist) boat traffic, and the other canal to provide water for en route villages and farmers; (e) improved water quality in the Three Lakes through dredging about 260,000 m3 of sediment, and construction of embankments; (f) reforestation of about 2,400 ha in the Wulixia reservoir catchment and along the Lijiang River; and (g) rehabilitation and construction of over 37 km sections of embankment along the Lijiang.
Guilin Small Area Improvement Outputs included sewer and drainage networks, paved roads and foot paths, public toilets, garbage collection points, and street lights in four low income neighborhoods, serving about 40,000 residents in four sites. These improvements have revived the neighborhoods and increased the income opportunities for residents, who were able to engage in trading activities, rent shop and residential space at enhanced rents.
Sugar Industry Pollution Abatement Treatment of stillage resulting from alcohol production at two small sugar refineries to demonstrate options for wastewater treatment. The project financed equipment costs, while the civil works were financed with own funds outside the project.
Institutional Development Wastewater-related institutional reforms of the project were: (a) establishment of the new Nanning Sewerage Company (NSC) as an autonomous company with a business license, and commencing operations of the existing Guilin Sewerage Company (GSC) as a commercial enterprise with a business license; (b) introduction of enterprise accounting, and improved financial management practices in the NSC and the GSC; (c) arrangements for retention of all revenue by NSC and GSC; (d) transfer of all wastewater assets to the two companies; (e) development of two well managed wastewater companies with a strong cadre of experienced staff; and (f) achievement of financial viability by one wastewater company (NSC), meeting all operating costs including debt service.
An institutional arrangement to achieve the short-term objective of maintaining the required water flow in the Lijiang was put in place by GM. However, as the final report was completed only in late 2007, the establishment of the broad-based Lijiang Water Commission did not materialize.
The project strengthened the Region and City Environmental Projection Bureaus (EPB) with training, equipment to enhance monitoring of industries and water bodies, including increasing the frequency of monitoring.
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Annex 4. Industrial Pollution Control
This report is based on the implementation of the Nanning Industrial Pollution Source Control Plan prepared by the Nanning Environmental Protection Bureau (dated January 20, 2008).
The total annual wastewater discharge in Nanning in 2006 was 372,255,700 m3, of which industrial wastewater discharge amounted to 166,013,100 m3 (44.60%). Amongst the pollution loads of industrial wastewater, 60% of COD and ammonia nitrogen discharge came from agricultural by-product processing and paper industries.
At project appraisal, the Nanning Municipal Government agreed to implement an industrial pollution source control plan in parallel with the Bank-financed project. The main elements of the plan were implementing measures to reduce pollution impacts from 33 highly polluting industries, and improving the performance of the Nanning Environmental Protection Bureau (EPB) to ensure industry compliance with environmental regulations. In order to assist the EPB implement the plan, the Project provided support to procure advanced equipment, and training inputs to enable more effective monitoring and to increase the frequency and the number of industries monitored.
In the early 90s, industrial growth in Nanning was relatively weak, and pollution discharges were mainly from light chemical industries. The total pollution load, measured through the equal standard pollution load (ESPL) 3 produced by Nanning Sugar Refinery and Paper Mill (SRPM), Guangxi Citric Acid Refinery, NCG, and Nanning Maoqiao Paper Mill accounted for over 90% of the total ESPL of industrial wastewater discharges in urban areas. Organic pollutants comprised the largest portion of industrial wastewater pollution. The sum of ESPLs of COD and BOD accounted for 89.35% of the total ESPL of wastewater pollutants in 2000, and could reach 96.53% if the ESPLs of oil and volatile phenol were added.
Due to the changing pattern of industry later in the decade, pollution loads from industries changed, as the sum of the ESPLs produced by the agricultural by-product processing, paper manufacturing and paper processing industries exceeded 80% of the total for the city as a whole. Including the pharmaceutical and chemical industries, the amount of wastewater discharge and pollutant load accounted for about 95.06% of the total. Specifically, the ESPLs of eight enterprises, e.g., Nanning Phoenix Paper Co., Ltd, Nanning SRPM Co., Ltd, NCG, Mingyang Sugar Refinery of Nanning Sugar Co., Ltd and Guangxi Yangsen Alcohol Co., Ltd accounted for about 75% of the total for the city, with the COD, SS and oil ranking as the three top pollutants.
The polluting industries identified fell into two broad categories: (a) enterprises with poor production capacity and heavy pollution, which required drastic action such as closing down; and (b) enterprises that could be reformed to comply with discharge/emission standards stipulated for industrial pollution sources.
NMG, through the EPB, implemented strong time-bound measures under the plan, requiring the concerned enterprises to undertake measures such as: enhanced wastewater treatment;
3 ESPL is a measure used to assess impact caused by pollutants discharged from a system (i.e., a city or industry) that consists of several pollution sources with different pollutant discharges. The measure helps find the main sources and the pollutants. EPSL= pollutant discharged (kg/a) ÷ environment quality standard value (mg/m3- gas or mg/l-water). ESPL of a pollution source is the total value of the pollutants discharged. ESPL of a system is the total value of the pollution sources.
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energy saving, introduction of clean technology; adjustment of production targets; and process modifications. Those enterprises that were not qualified for rehabilitation due to their poor financial performance, and which were beyond economic rehabilitation were closed down. Industries in the Chaoyang Stream watershed were given deadlines for compliance with discharge standards, failing which they were also closed down. By the end of 2000, 103 industries that were forced to close or had to close for financial reasons, and the remaining 137 industries along the Stream were in compliance with the prescribed discharge/emission standards. Through these measures, NMG successfully accomplished the objectives of the Pollution Source Control Plan.
The following heavily polluting industries were closed down: Chunguang Electroplating Factory, Lianchou Electroplating Factory, Associated Educated Youth Plant of Walking Tractor Factory, Nanning Umbrella Plant and Nanmian Dyeing Plant.
From 1998-2002, EPB increased monitoring of, and compliance by industrial enterprises. This enhanced monitoring resulted in the construction of the following: (a) a 35,000 m3/d industrial wastewater treatment plant at the Nanning Sugar Refinery and Paper Mill, which is the largest and most regulated in the Region; (b) a complex wastewater treatment plant at the Nanning Monosodium Glutamate (MSG) Factory; (c) a biochemical treatment facility at the Nanning Citric Acid Plant, only the second such plant in China; and (d) a wastewater treatment facility to treat pesticides at the Nanning Chemical Group Co., Ltd (NCG). All the plants met compliance requirements.
In 2006, NMG took additional measures to expedite industrial reform. Eight industries in the Chaoyang Stream catchment were relocated: Nanning Cannery, Guangxi Qiuchao Group, Nanning Mengxue Regular Chemical Products Co., Ltd, Sugar Refining Production Line of Nanning Sugar Refinery and Paper Mill (with 48 years of operation), Guangxi Gold Co., Ltd, Nanning Zhuangning Industrial Park Co., Ltd (Northern Park), Nanning Zhuangning Industrial Park Co., Ltd (Southern Park) and Nanning Soy Source Factory.
Additionally, GAR environmental protection funds were used to finance eight wastewater treatment projects including chemical (e.g., Nanning Chemical Group Co., Ltd.), paper making, and sugar refining industries that make up 60% of the total COD discharges in Nanning, which are now in compliance with discharge standards. The compliance rate of industrial wastewater discharge in Nanning has been stabilized at about 93%, indicating a significant breakthrough in the control of industrial pollution. Industries within Chaoyang Stream catchment have all met the emission standards.
Table 1 and 2 below summarize the progress in implementation of the industrial pollution reduction plan for the Chaoyang Stream area, and Jiangnan District, respectively.
- 36 - Table 1. Summary of Implementation Progress of Pollution Control Plan by Industries Along Chaoyang Stream
Industrial Major Target Implementation Measure Name of Industries Wastewater Pollutant or Date Progress (t/d) Treatment Chunguang Electroplating Heavy metal, 2 Jun ‘96 Closed Factory acid Lianchou Electroplating Heavy metal, 2.5 Sept ‘96 Closed Factory acid Associated Educated Youth Heavy metal, Plant of Walking Tractor 58.8 Jan ‘96 Closed acid Factory Closure/ Heavy metal, Nanning Umbrella Factory 190 Jan ‘96 Closed Rectification acid Oil-contained Walking Tractor Factory 833.1 Nov ‘95 n.a wastewater High-color Rehabilitated/ Nanmian Dyeing Plant dyeing Apr ‘95 Transformed wastewater Monitoring Station of Coal Fetid Apr ‘95 Closed Bureau wastewater Operation MSG Refinery 4237.8 COD, BOD, SS Jan ‘99 Suspended* Operation Citric Acid Refinery 3647.5 COD, BOD, SS 2000 Suspended Cooling water Operation Soap Works 480.5 recycling / Dec ‘98 Suspended Desulfurization Improvement COD, BOD, Closed Woolen Mill 1193 Dec ‘97 with time Dyes (Bankrupt) limits Oil-contained Wires and Cables Factory 429.2 Dec ‘98 Qualified wastewater Cooling water Cigarette Factory 1440.7 Dec ‘98 Qualified recycling High-salinity Closed Civil Soy Source Refinery 41.3 Dec “98 wastewater (Bankrupt) Oil-contained Operation Repair Shop of Bus Station 30 Dec “98 wastewater Suspended Oil-contained Operation Yibin Motorcycle Factory ‘97- ‘99 New wastewater Suspended Pollution Flushing Jaitai Concrete Factory ‘96-‘97 Zero-discharge Source wastewater Control Farm Truck Factory of Operation Oil, SS ‘97-‘99 Walking Tractor Factory Suspended
* Indicates the enterprises are under rehabilitation.
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Table 2. Summary of Implementation Progress of Pollution Control Plan by Industries in Jiangnan District Discharge Implement Wastewater Concentration (mg/L) ation Flow Name of Discharge Progress in Direction Industries (t/d) SS COD BOD Treatment 2006 Discharge into network Nanning after SRPM 17,900 656 2,679 603 treatment Qualified Direct As above 12,000 discharge Qualified Nanning Aluminium Direct Factory 2,700 16 4.4 discharge Qualified Nanning Direct Tingzichong Power Plant 2,600 33 discharge Closed Operation Tannery 6,500 1,252 1,532 488 Discharge Suspended Lysine into Nahong Operation Factory 7,800 105 156 60 Channel Suspended Polyfiber Direct Operation Factory 900 discharge Suspended Nanning Silk Direct Closed Factory 200 516 discharge (Bankrupt) Nanning Hemp Direct Closed Spinning Mill 30 discharge (Bankrupt) Nanning Direct Operation Smeltery 40 50 25 discharge Suspended Plate Glass Direct Factory 15,600 1 1.2 1 discharge Qualified Separate NCG 29,100 641 269 treatment Qualified Closed Nanning Silk (Bankrupt in Spinning Mill 4,500 153 93 58 1996) Queen Beverage Closed in Shuitang Factory 950 Oct 1996 River Small electroplating plants and Closed in System tanneries Nov 1996 Total 101,180
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Annex 5. Economic and Financial Analysis
Financial Analysis
Financial returns from the wastewater investments depend on implementation of tariff increases, which are mandated by the National Government’s continuing policy guidelines promoting full cost recovery in wastewater services, and local government compliance with the guidelines. Compliance with the project financial covenants by the two wastewater companies is illustrated in the table below.
NSC has implemented an average tariff of Y0.50/m3, which has been adequate to meet the project financial covenants, though it would require a further increase in 2008 when the treatment plant is fully operational in 2008. Since appraisal, Nanning has made a series of tariff increases such that the 2007 tariffs are significantly higher than those assumed at appraisal. The wastewater tariff in Nanning generated sufficient wastewater revenues for NSC to meet its financial covenants for operation and maintenance expenditures and debt-service in all years up to and including 2007, with an operating surplus. NSC has sought a tariff increase of Y0.90/m3 average. A tariff increase to a level of Y0.80/m3 at least is anticipated in the first half of 2008, which will allow NSC to meet its financial covenants until at least 2010.
Guilin was not in compliance with the cost recovery and debt service covenants of the project. With an average tariff of Y0.60/m3 at project closure, it required government support to meet debt service payments. The ICR assessment is that NSC is likely to achieve sustainability, while GSC will require strong government commitment and support to achieve this goal. GM is committed to sustainability of the sector, and plans to achieve this in a phased manner.
Revenue collection performance in both NSC and GSC averaged 90%, and is considered satisfactory. All proceeds from the wastewater tariff are remitted directly in full to the companies, which allow them to monitor income collection performance and gives them the financial autonomy envisaged in the SAR.
Statement Compliance with Financial Covenants (Unit: million Yuan) ITEM 2007 2008 2009 2010 Nanning Sewerage Company I Operational income 101.80 133.66 166.15 241.23 II Operational expenses 19.99 50.01 55.51 80.56 III Debt service 64.39 73.62 70.67 76.79 Net surplus 17.42 10.03 39.97 83.88 Guilin Sewerage Company I. Operational income 53.80 52.77 52.80 52.83 II. Operational expenses 43.17 46.52 48.47 50.48 III. Debt service 25.98 21.49 21.54 22.82 Net Surplus -15.35 -15.24 -17.21 -20.47
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Economic Analysis
There is no document trail readily available to support the SAR statement that the project would achieve an overall 21% EIRR (a figure reported to have been extracted from the preparation consultant’s report). For several of the larger components, economic justification was based on least cost analysis rather than economic cost-benefit assessment. The assessment of achieved economic benefits is further compromised by the fact that several crucial sub-components were commissioned only recently, or are still to be commissioned. Thus, evaluation of benefits or assessment of the capability of the investments were not done for the following: (a) power generation at the Wulixia hydro power plant: power generation has not commenced as the dam is under major rehabilitation; (b) the Xicheng town wastewater investments: the treatment plant is still under construction under a BOT contract; (c) Baisha township wastewater investments: the oxidation pond has not yet been commissioned; and (d) the Guilin solid waste transfer: the transfer station’s capability to handle the design load can only be confirmed at the end of the first quarter of 2008.
At appraisal, economic benefits of wastewater components in Nanning and Guilin were justified on the basis of least costs. For the Guilin wastewater component, which included mostly networks, data was not readily available and economic benefits were not quantified. Least cost options were to be evaluated from a number of alternatives, including: utilizing existing treatment plant capacity or construction of new treatment plants; treatment processes, i.e., primary or secondary treatment; network configurations and alignments; alternative pipeline alignments and locations for pump stations; operating costs, etc. Continued dependence on the existing septic tank systems was not considered an acceptable option.
Least cost options for capacity and treatment levels were adopted for the Nanning STP following assessment of projected flows and model studies of the Yongjiang. Despite an increase in the STP design capacity by one-third during implementation, capacity utilization at project completion was 90%, and the substantial economic benefits were derived. The least cost design option adopted at appraisal for the dual function Dakengkou storm flood pumping station was to include a facility to operate it in the reverse mode to pump clean water to the Chaoyang stream. Some economic benefits were forgone when the decision was made to construct a separate pumping station to refresh the Chaoyang Stream. Despite this, land values and economic regeneration increased significantly in the area of the Chaoyang Stream, and environmental conditions improved.
This Project also had important economic and social benefits, despite its objectives being originally focused on environmental improvement. Over 350 permanent jobs were created in the wastewater facilities in the two cities, solid waste facility in Guilin, and in the maintenance and management of the plantations along the Lijiang and Wulixia watershed. Many hundreds of temporary jobs were also created during the construction of the facilities. Improved water quality in the local rivers and streams will benefit many residents in the project area by providing better living conditions and improved public health. Farmers and others living downstream of Nanning will also benefit, and the risk to pollutants entering the food chain will be reduced. The Project safeguards against a deterioration in the water quality of the Yongjiang as Nanning’s urban area expands.
No quantitative economic justification was made for the Small Area Improvement (SIA) component at the time of project appraisal, which appears to be reasonable as it was designated as a pilot (experimental) initiative. It succeeded beyond expectations because: of the support received from residents and the city governments; it generated significant economic and social regeneration in the selected areas; it was replicated (in a modified form) by both Nanning and Guilin city government for
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their own urban regeneration program called the ‘Small Streets Program’. Some important economic benefits of this component are: (a) there is a willingness on the part of local residents to contribute to neighborhood improvements where they can see this accelerating livelihood or economic conditions; (b) social workers who were engaged to support the SAI program observed that this willingness was greater in suburban/township areas than in urban areas, probably due to higher levels of self-reliance being the tradition in those areas; (c) elimination of flood risk and the avoided losses, was a very high priority for urban residents, together with improved infrastructure which generated small business activities, and enhanced property values and rental opportunities; (d) the Baisha township SAI initiative demonstrated an inherent willingness to pay for local sewerage connections as a valued facilitator of livelihood improvement; and (e) the consultation and participatory process used in SAI schemes proved to be effective in targeting investment to the real needs of local communities.
The Project also facilitated economic development by providing for rural to urban migration in an environmentally sustainable manner, and in doing so, contributed to raising significant numbers of local people from poverty. The poor, who are the most vulnerable to unhygienic living conditions are benefiting most from the improvements under the SIA, which was specifically targeted to poorer areas with sub-standard local urban infrastructure. The social and economic benefits of the SAI in 31 areas have been significant in both forging more cohesive communities through the participatory process followed, and in providing quality of life gains from new social infrastructure and better income earning opportunities.
Subprojects under the Lijiang flow regulation were justified on the probable increase in tourism revenues resulting from enhanced flows in the Lijiang during the dry season, and the opportunity cost of water in the Lijiang basin. It is not possible to assess whether the economic benefits of the flow regulation are greater or less than those originally assumed as the effects of the water supplementation and conservation measures on water flows in the Lijiang have not yet been evaluated. However, the Lijiang river embankment investment together with associated forestry initiatives appears to have been effective in arresting river bank erosion, and resulting siltation of the river channel, which will facilitate navigability and protect tourism revenues. The significant increase in tourist visits and revenues generated (from US$0.4 billion to US$1.1 billion) during the project period, enhances the probability of the interventions adding economic value assuming some degree of flow improvement can be demonstrated. Additionally, the opportunity cost of water used in the alternative economic justification was a conservative US$0.06 (now equivalent to Yuan 0.5).
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Annex 6. Resettlement Implementation
During project preparation, the only resettlement identified in the project was for sewer line construction in the densely built-up center of Nanning along the Chaoyang stream, and for Jiangnan STP, located at an abandoned brick yard on the other side of the Yongjiang River. A Resettlement Action Plan (RAP) for Nanning sewerage and drainage component was prepared for project appraisal conforming to Bank and Government requirements. The solid waste landfill site in Guilin was owned by the municipal government for a number of years, and involved no displacement of people. Land acquisition or resettlement of people was not anticipated for the other components of the project.
During the past 10 years of implementation (from 1998 to 2007), additional resettlement requirements were identified for the Nanning sewerage component, and for four sub-components in Guilin. This required the preparation of two more Resettlement Implementation Plans (RIPs) in Nanning and four RIPs in Guilin. After completion of all resettlement activities mentioned in each RAP/RIP, a resettlement assessment was undertaken by the external monitor in collaboration with the project owner. Both the QAG and an EASES resettlement thematic supervision missions also reviewed resettlement implementation under the project in 2004, and found the performance satisfactory.
Resettlement activities completed are showed in the table below:
Sub-Component Sub-Projects LA HD PAP Cost EMR (mu) (m2) (No.) (Y mil) (No. Reports) Nanning 1. Chaoyangxi Whole scheme from 10 12987 940 21.26 4 Rehabilitation Project No.13 Middle School (Phase I) to Jiangnan STP 2. Chaoyangxi From Dakengkou to 124 9162 80 9.86 2 Rehabilitation Project Jiangnan STP (Phase II) 3. Chaoyangxi Drains and sewers near 0 6055 293 22.66 0 Rehabilitation Project Jiangnan STP (Phase III) Sub-total in Nanning 134 28204 1313 53.78 6 Guilin 1.Guilin Sewerage Sub- (i) Expanded Beichong 39 216 45 4.34 5 Component STP (ii) Mantoushan PS 2. Xicheng Wastewater Sewage pipes 0 0 0 0.24 2 System 3. Solid Waste Sub- Jiashan Solid Waste 50 0 78 9.80 2 Component Transfer Station 4. Wulixia Replenishment (i) Canal lining 16 0 14 0.25 2 Sub-Component (ii) Shilong Hydro- power Station `Sub-total in Guilin 105 216 137 14.63 11 Grand Total for GUEP 239 28420 1450 68.41 17
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Notes: LA = Land acquisition; HD - House demolitions; PAP = Project affected people; EMR = External Monitoring Reports and Resettlement Evaluation Reports produced (# of reports)
Nanning had an established capacity for resettlement following relocation of households that returned after the 1976 Cultural Revolution, a majority of whom were only offered 20 m2 spaces in public housing the Chaoyang Stream area. Households affected by the Chaoyang Stream works were happy to move to new apartment buildings that were constructed for them nearby, thereby resolving a contentious issue that had lasted for over 20 years. The Nanning Resettlement Office that managed the resettlement for the Chaoyang Stream PAPs received the award of National Model for Resettlement in 2001. The responsibility for the second phase resettlement was transferred to the Nanning Sewerage Company (NSC), which carried out the resettlement satisfactorily, along with effective resettlement monitoring and evaluation. In later years, resettlement progress was affected by the government’s compensation rates, which did not match the fast growing housing market, and expectations of the affected people. Despite the efforts of the implementing agencies, the prolonged resettlement progress delayed the third phase of civil works. Additional support and coordination among all the agencies involved could have made up for the lost time.
Five RIPs were prepared during project implementation to accommodate changes to subprojects and additional works financed using loan savings. Resettlement training was provided to more than eight implementing agencies. Internal and external monitoring systems were established, which covered not only the Bank supported sub-projects, but also those listed in the RIPs, and linked with the Bank supported sub-projects.
The outcome of each resettlement assessment showed that the resettlement implementation was completed successfully with full participation of the affected persons whose livelihoods and standards of living were all improved afterwards. No resettlement issues remained.
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Annex 7. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/Specialty Lending China Department, Urban George Plant Senior Sanitary Engineer TTL/Sanitary Engineering Environment Division China Department, Urban Songsu Choi Senior Urban Economist TTL/Economic Analysis Environment Division China Department, Urban Co-TTL/Municipal Edouard Motte Senior Municipal Engineer Environment Division Engineering Alain Bertaud Principal Urban Planner South Asia Urban Division Urban Planning Principal Chemical Roger Heath Industry Division Industrial pollution Engineer Kyung Wook Hur Financial Analyst Consultant Financial Analysis Mary Judd Anthropologist Technical Assistance Unit Sociology Wei-jen Leow Project Analyst Resident Mission, China Project Analysis South Asia Rural Douglas Olson Irrigation Engineer Water resources Development Margaret Png Legal Counsel Resident Mission, China Legal Chongwu Sun Project Officer Resident Mission, China Environment Dawn Vermilya Financial Analyst Resident Mission, China Financial analysis Yanxiang Wang Environmental Consultant Consultant Environment Youlan Zou Resettlement Specialist Resident Mission, China Resettlement Supervision/ICR TTL/Municipal Edouard Motte Senior Municipal Engineer EAP Urban Unit Engineering Senior Environmental Chongwu Sun Resident Mission, China TTL/Environment Specialist Youlan Zou Resettlement Specialist Resident Mission, China Resettlement Wei-Jen Leow Project Analyst Resident Mission, China Project Analysis Graeme Barnard Water Resources Specialist Consultant, AusAid Water Resources Johanngeorg Renkewitz Financial Specialist Consultant Financial Analysis Shunong Hu Water Resources Engineer Resident Mission, China Water Supply Senior Procurement Liu Zhentu Resident Mission, China Sociology Specialist Tang Hongde Senior Municipal Engineer Consultant Municipal Engineering Lead Management Raja Iyer EAP Urban Unit Institutional Analysis Specialist Financial and Institutional Louisa Huang Financial Specialist Resident Mission, China Analysis Xuemei Guo Program Assistant Resident Mission, China Team Support, Beijing Vellet Fernandes Program Assistant EAP Urban Unit Team Support, Hdqtrs
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(b) Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 08/12/1998 Satisfactory Satisfactory 0.00 2 02/03/1999 Satisfactory Satisfactory 3.50 3 09/20/1999 Satisfactory Satisfactory 3.95 4 03/31/2000 Satisfactory Satisfactory 4.07 5 09/20/2000 Satisfactory Satisfactory 4.82 6 03/30/2001 Satisfactory Unsatisfactory 7.68 7 12/17/2001 Satisfactory Unsatisfactory 10.58 8 06/24/2002 Satisfactory Satisfactory 12.05 9 12/19/2002 Satisfactory Satisfactory 14.91 10 03/26/2003 Satisfactory Satisfactory 14.91 11 10/08/2003 Satisfactory Satisfactory 19.45 12 03/31/2004 Satisfactory Satisfactory 21.12 13 11/23/2004 Satisfactory Satisfactory 23.94 14 06/21/2005 Satisfactory Satisfactory 27.57 15 01/19/2006 Satisfactory Satisfactory 39.69 16 12/28/2006 Satisfactory Satisfactory 56.54
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(c) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands No. of staff weeks (including travel and consultant costs) Lending FY94 12.74 FY95 39.93 FY96 150.38 FY97 351.96 FY98 149.92 FY99 1.81 Total: 706.74 Supervision/ICR FY96 0 0.00 FY97 0 0.00 FY98 10.30 FY99 120.15 FY00 29 58.78 FY01 36 65.87 FY02 35 83.69 FY03 15 36.87 FY04 18 49.54 FY05 19 43.80 FY06 13 42.23 FY07 13 40.26 FY08 6 33.65 Total: 184 585.14
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Annex 8. Detailed Ratings of Bank and Borrower Performance
Bank Ratings Borrower Ratings Ensuring Quality at Satisfactory Government: Satisfactory Entry: Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance:
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Annex 9. Summary of Borrower's ICR and/or Comments on Draft ICR
Development Objectives, Project Design and of Quality at Entry Original Objectives. These are stated in the text of this ICR (Section 6.2). Full details of the background to these objectives are set out in the Bank’s Staff Appraisal Report (SAR) dated 15 May 1998 (Report No. 16622-CHA). Revised Objectives. Project objectives remained unchanged during the implementation period. Original Components. Component descriptions are provided in the SAR, and in the main text of this ICR. Revised Components (as constructed). Changes were made to the scope of works to reflect changing circumstances, and to make use of loan savings that arose during implementation. The constructed infrastructure, compared to those stated in the SAR, is summarised in Table 1 (Nanning) and Table 2 (Guilin) below. The main changes are summarized below: Nanning Components Sewerage and Drainage (i) The design capacity of the Jiangnan STP was increased from 180,000 m3/day to 240,000 m3/day, and full secondary treatment was provided, as required by national regulations.
(ii) Main and secondary sewers were increased from the 37 km originally planned, to 67.5km.
(iii)The capacity of the Dakengkou storm pumping station was doubled in capacity to 24m3/sec, and was designed as a single purpose facility to pump storm flood water only. A separate pumping station, financed with local funds, was constructed to provide flushing water from the Yongjiang to the Chaoyang Stream.
(iv) Procurement of computers and MIS development for the night soil sub-component was cancelled as Government reforms transferred the responsibility for nightsoil management to district government level, eliminating the need for a centralised management system at the municipal level. Small Area Improvement Component (SAI) (v) Six out of the eight areas originally selected for the SAI component became unsuitable. Five replacement areas were selected and an additional 20 areas were later included to expand the component, utilizing loan savings. Institutional Development (vi) Environmental monitoring equipment for the Nanning EPB was procured using local funds, rather than the loan funds.
(vii) The original scope of work under the consulting services to Nanning Sewerage Company (NSC) was extended to assist in the justification of the enhanced Jiangnan STP, and to provide additional project management and construction management support to NSC.
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Guilin Components
Guilin Sewerage (viii) Xicheng STP was constructed under a BOT contract, and the length of the sewer network financed under the project was increased from 3 km to 49 km.
(ix) The plan to build three oxidation ditches in Yangshou, Xingping and Baisha was changed. Yangshou and Xingping constructed 20,000 m3/d STPs using national bonds, and the project financed only one oxidation ditch (2,500 m3/d) in Baisha town.
(x) The original plan to build 2,300 m of slope protection in the Wulixia diversion canals and reservoir area was deleted from loan financing, and constructed using local financing.
(xi) About 4.12 km of secondary sewers were included to improve the wastewater collection in the Qintan service area.
(xii) Under the North district sewer system, additional works were carried out to reduce pollution entering the Taohuajiang, including: increasing the originally planned sewers by 8.4 km (to 19.4 km), and 6.1 km of sewers and a pumping station to improve wastewater collection in the newly developed areas, and a pumping station.
(xiii) Due to conflict with national policy, approval for purchase of the sewer maintenance vehicles could not be obtained. Instead, Guilin purchased three sets of ultraviolet (UV) disinfection sets for installation at Beichong and other WWTPs.
Lijiang Flow Regulation (xiv) The planned water diversion canal to the Three Lakes was modified to provide two canals: one for the Three Lakes and the other to provide water to villages en route. The additional works were undertaken using domestic funding.
(xv) Based on new design guidelines for canals, issued by the Ministry of Water Resources, it became necessary to incur increased costs to construct additional features such as longitudinal joints, protection against land slides, weep hole treatment, for which the Bank agreed to finance only a portion of the expenditure.
Solid Waste Management (xvi) The capacity of the solid waste transfer station was changed from 300 t/d originally planned to 800 t/d based on new waste generation data, and to cater for the second phase of the landfill.
(xvii) A leachate treatment facility to treat 300 t/d was constructed near the landfill using national bond funds.
EPB Capacity Building (xviii) Due to disagreement with the Bank over payment terms for the EPB packages A and B, the procurement was changed to own financing, and instead, one set of Inductively Coupled Plasma Simultaneous Atomic Emission Spectrometer and 1 set of FT-IR Spectrometer System were procured under the Project.
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All the above changes were discussed with the World Bank and agreed solutions were documented in writing either in the Aide Memoires or in separate correspondence. Table 1 - Nanning: Summary of Planned and Actual Outputs, and Costs Component and Asset Physical Quantities Costs (RMB Million) type Final Design Project Final Final SAR Output SAR Design Cost*
1. Sewerage and Drainage in Nanning 755.84 1267.37 n/a Chaoyang Stream 3.5km 3.1km 3.1km 56.92 50.30 37.55 Interceptors 3 3 3 Chaoyang dredging 180,000 m 222,000 m 222,000 m 43.00 54.45 43.67 and embankments 3.1 km 3.1km 3.1km Jiangnan Conveyor 3.9km 3.9km 3.5km 24.04 32.85 24.83 River crossing 240,000 m3/d 240,000 m3/d 240,000 m3/d 28.67 39.89 10.56 0.5km 1.4 km 1.4 km Wastewater PS. 240,000 m3/d 240,000 m3/d 240,000 m3/d 20.80 27.49 11.54 Storm water PS 12 m3/sec 24 m3/sec 24 m3/sec 15.00 28.66 14.45 3 3 Jiangnan WWTP 180,000 m3/d 240,000 m /d 240,000 m /d 147.00 627.11 180.05 (primary only) (secondary) (secondary) New Sewers 37 km 63.7km 67.5km 128.50 352.90 141.47
Sewer Maintenance Not specified 12 Vehicles 12.14 18.72 11.24 Equipment Nightsoil vehicles 16 vehicles 19 tanker 10.20 14.18 3.09 And Equipment trucks
2. Small Area Improvements 36.00 73.24 63.13 Communities 8 27 27 Roads 51,000 m2 272,000 m2 272,000 m2 Drains & Sewers 51km 77.7km 77.7km Public Toilets 10 52 52 Waste Stations 8 47 47
3. Institutional Development 17.05 21.98 12.78
Sewerage Company 87 m-months 97 m-months 94 m-months
4. Design and Supervision 35.03
5. Contingencies 121.83*
6. Total Costs 965.75 1362.59 557.26 *Total contingency prorated to the two components
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Table 1A : Additional Works Financed Utilizing Loan Savings in Nanning
Construction contents (includes Investment Contract No. Contract name secondary and tertiary sewers) （RMB million ） Gaofeng, 5.52 Jiefang, Gaohe, Sewers in Gaofeng Road (574.9m); in NMW/5.0/N Mingle, Beining Jiefang road (1058 m); and in Gonghe, sewers Minle, Beining (2095.9 m). 4.5 Huadong, Sewers in Huadong (1241.8m); and in NMW/5.0/L Huaxi sewers Huaxi (1678.1m)/ 5.5 Renming, Sewers in Renming Road (2307.4m); and NMW/5.0/M Xinyang sewers in Xinyang (1468m). 11.69 Jiangnan, Sewers in Jiangnan (3259m); and in NMW/5.0/O Nanzhan sewers Nanzhan (7516 m). Sewers with length of 9,962m of 17.18 NMW/5.0/P Baisha sewer diameters 600 mm to 2000 mm. 28.57 Sewers with total length of 9,931.5m of NMW/5.0/Q Wuyi sewer diameters 300 mm to 2000 mm. Jiangnan STP 177.82 NMW/1.0 Phase I 240,000 m3/d secondary treatment Jiangnan STP 4.49 NMW/1.0-1 Phase I vehicle 19 vehicles used for production 0.86 NSC GIS NMG/8.0 system Jiangnan STP 0.54 NMT/1.0-2 Phase I office equipments
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Table 2 - Guilin: Summary of Planned and Actual Outputs, and Costs
Component and Physical Quantities Costs (RMB Million) Asset type SAR Final Design Output SAR Final Final Design Cost * 1.Sewerage and Solid Waste Management 406.18 422.20 295.59 -12 km sewers -9.1km sewers Qintan trunk 9.1km sewers -160,000 m3/d -250000m3/d 77.60 99.40 42.77 sewers PS PS -27.3km -19.4km sewers sewers -11km sewers -10,000m3/d -10,000m3/d -30,000m3/d PS N. District sewers PS -5,000m3/d PS 147.60 132.40 62.70 -30,000 m3/d PS -5,000m3/d PS STP -30,000m3/d -30,000m3/d WWTP WWTP -2.5km sewers -9.1km sewers -9.1km sewers -100m -2.2 km -2.2 km embankment embankment embankment Three Lakes -6.3 km -7.3 km 39.38 77.00 68.04 -7.3 km diversion canal diversion canal diversion canal -Dredging: -Dredging:
168,400 m3 249,000 m3 -50.34km -3km sewers -49 km sewers Xicheng sewers -20000 m3/d -WWTP under 48.00 26.50 24.00 Wastewater -WWTP under STP BOT BOT -Landifill:2 -Landfill: 2 -Landfill: 2 million m3 million m3 million m3 -800 ton/day -800 ton/day Solid Waste -300 ton/day 86.30 81.90 93.28 transfer transfer transfer station station. station. -14 vehicles -31 vehicles -31 vehicles One 2,500m3/d County Town 2,500m3/d 3 Aeration ponds aeration pond 7.30 5.00 4.80 Wastewater aeration ponds in Baisha town 2. Lijiang Flow Regulation 197.90 167.93 137.05 2,800 ha -4 forest -2,630 ha -4 forest Lijiang Plantation cabins; and 50.40 40.30 37.20 -67 forest cabin cabins; seedlings seedlings - 24.5 km canal - 21.7 km -Rehabilitate rehab canal rehab 21.7 km canal Wulixia -400 m canal -350 m culvert -350 m culvert 48.80 35.30 30.27 Replenishment - 2*500Kw -2*500Kw -1*800Kw hydro-power hydro-power hydro-power station station station Lijiang -26.07 km 31.9 km 31.9 km 62.40 61.33 51.34 Embankments embankment embankment embankment Wulixia Plantation -8,534 ha 8,486 ha 36.30 31.00 18.24 3. Small Area Improvement 30.20 25.67 21.30 Communities Road 30.20 25.67 21.30 Drains, Sewers 16.66 km 16.66 km 4. Institutional Strengthening 24.28 10.30 17.80
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GSC 79 m-months 69 m-months 69 m-months 11.0 10.9 EPB 4.5 10.3 2.8 Lijiang TA 36m-months 38m-months 8.7 4.1 4. Design and Supervision 28.63 6. Contingencies 99.21 6. Total Costs 786.40 621.10 471.76 *Total contingency prorated to the two components Project Implementation Project implementation was completed successfully, even though it took longer than planned. At the start of implementation delays were caused by weak project management, and because implementing agencies and design institutes were unfamiliar with the World Bank requirements (e.g., procurement procedures, contract management and construction supervision and disbursement procedures). The preparation of detailed designs and receiving approvals was also time-consuming. The shortage of counterpart funds was particularly an issue in Guilin. Other delays occurred because of the long time taken to reach agreement with the Bank on some matters, such as the capacity of the Nanning STP, wastewater treatment standard, and the use of turnkey contracts. The completion of detailed designs in Nanning took over two years. The Chaoyang Stream wastewater interception was completed early during the Project, but completion of the pumping stations took much longer due to design changes and the decision to construct a separate pumping station to refresh the Chaoyang Stream. The Jiangnan STP was finally commissioned in late 2007. All these factors contributed to the additional time of three years required to complete implementation.
Institutional Changes. The Guilin Prefecture was abolished in 1998, and the Guilin Municipality became responsible for the Lijiang water resource management. The Xing’an Water Conservancy Bureau, originally responsible for Wulixia subcompoment, was replaced with the Guilin Water Conservation Bureau, which also assumed the responsibility for the loan repayment. Resettlement. Land acquisition and resettlement plans prepared before appraisal were modified to reflect actual conditions, and supplementary plans were prepared in consultation with the Bank team during the course of project implementation. Independent monitoring and audit of resettlement activities took place in accordance with Bank procedures, and the Bank team also made regular supervisory inspections. The monitoring and audit reports indicate that all resettlement activities were completed in accordance with agreed procedures, and the households affected are satisfied with the outcome. A separate project resettlement report was prepared and submitted to the Bank.
Environmental Safeguards. No significant environmental management issues arose during project implementation, and the environmental management plans prepared to mitigate potential adverse environmental impacts resulting from the project activity were implemented in full.
Loan Utilization. About US$13.5 million of the loan and US$0.56 million of the credit were cancelled during implementation. The loan allocation for Nanning was fully utilized, whereas about US$12 million was cancelled from the Guilin allocation. Some loan savings were used to expand networks, increase the capacity of Jiangnan STP, and increase the number of SAI areas. The unutilized loan of US$0.227 million was cancelled at loan closure. Quality at Entry
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From the Borrower’s perspective, the quality at entry was satisfactory in most respects as it responded to urgent pollution control priorities in Nanning, and environmental improvements necessary to support tourism development in Guilin. Project design was largely consistent with policies and regulations of the national, provincial, and municipal governments. However, the project as appraised had some specific shortcomings: • The original design failed to recognize the need for full secondary treatment at Jiangnan STP in Nanning. • The World Bank was not satisfied with the Nanning wastewater generation projections; hence there was no consensus reached on the optimum size for the first phase of the Jiangnan STP; and the decision was held in abeyance for the stage of detailed design • There were unresolved differences on the best strategy to achieve sewerage separation in the main urban area of Nanning traditionally served by a combined system. • The solid waste projections and the sizing of the solid waste transfer station in Guilin was not firmly decided at appraisal • The initial design of the technical assistance to NSC and GSC placed too much emphasis on institutional development and capacity building and not sufficient emphasis in supporting project implementation. • Financial analysis made by consultants during project preparation appears to have understated the cost recovery tariff. • Cost estimates made during project preparation phase proved to be overestimated, and significant loan savings resulted.
A. Achievement of Objectives, and Major Outcomes/Outputs
Nanning
The project is set to achieve the main project development objective in improving the water quality of Chaoyang Stream and the Yongjiang now that the Jiangnan STP has recently been commissioned, and receives almost the full design flows from the Dakengkou to Jiangnan conveyor. Flows in excess of the design capacity can be expected once the remaining sewer works are finally completed in the first half of 2008, using local funding. The implementation of the project has contributed a lot to the improvement of Nanning’s urban environment, and helped the city win awards as the national Livable City (Model City for Excellence in Water and Environment Improvement) in 2006, and the UN Livable City in 2007. The quality of water in Chaoyang stream has significantly improved from the pre-project situation, and the stench from wastewater entering the stream has been removed. This is achieved naturally during the wet season, and by water replenishment during the dry season. Improvements in water quality and the embankments have had a significant regeneration effect on the area, and property prices have risen more rapidly there than the Nanning average. The construction of the Jiangnan STP, providing full secondary treatment for 240,000 m3/day provides medium term assurance of water quality in the Yongjiang, and the planned expansion to 960,000 m3/day allows for demand for the foreseeable future. Through interception and treatment of wastewater discharged to water bodies, water quality objectives for the Yongjiang (Class III) and Chaoyang Stream (Class V) were achieved.
Institutional Reforms. In Nanning, institutional and financial reforms have been completed, which have ensured full compliance with the financial covenants in the loan agreement. Wastewater and water services are now provided through a partly privatized water group company that is managerially and financially autonomous of the Municipal Government. The institutional reforms in Nanning have been
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referred to by the World Bank as a model for other Chinese cities to follow and were presented as such at the International Water Association Conference held in Beijing in September 2006.
The small area improvement (SAI) works have brought livelihood improvements to a population of approximately 140,000 instead of an initially estimated 46,000. A broader outcome is that Nanning Municipal Government has used the SAI experience to develop and implement its own programs of street level and village centered improvements based on the SAI model.
Industrial Pollution Control. Industrial pollution control (IPC) in Nanning has been greatly improved during the life of the project. All large industries monitored by the EPB are now in regular compliance with discharge standards. Compliance by medium and small industries within the urban area is also assessed as 100%. The number of industries monitored by the municipal EPB has been increased from 75 to 86. This outcome has been achieved through a combination of industrial relocation, industrial modernisation and installation of pre-treatment and more effective enforcement by the EPB.
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Guilin
Lijiang and Three Lakes Improvements. Project investments supported economic development, especially tourism, in Guilin through: (i) maintaining water quality and adequate flow in Lijiang to accommodate large cruise ships; (ii) plantation of forests along the banks of the Lijiang (improving scenery) and in the Wulixia watershed including economic forestry (such as ginkgo, bamboo) that provided employment and supplementary incomes to farmers; (iii) replenishing water in the Three Lakes to maintain a water depth adequate for tourist boats; (iv) improving water quality of the Three Lakes with wastewater interception and lake bed dredging; and (v) improving embankments in the Lijiang and the Three Lakes. These improvements have generated significant benefits to Guilin’s tourism development.
The water quality in the Lijiang was maintained at Class II with the extensive interception of wastewater that previously discharged to the Lijiang and its tributaries. The Project made it possible to achieve Class IV water quality in the Taohuajiang, and Class III water quality in the Three Lakes. The dry season flow in the Lijiang was maintained at 35 m3/sec through diversion of water from the Wulixia reservoir. Maintaining adequate flow in the Lijiang and nearly 2,400 ha of plantation along its banks has served to enhance the scenery and maintain tourist boat traffic throughout the year. In addition to the scenery, plantation of economic forestry varieties (i.e., ginko and bamboo) increased income and employment to farmers and contributed to reduce poverty. The water quality of the Three Lake was improved through the interception of wastewater and dredging of the lakes. Water diversion to the Three Lakes has made it possible to maintain a water depth of about 2.5 m to facilitate tourist boat traffic in the Lakes.
Lijiang Water Resources Management. Consultants investigated and studied water resource management in the Lijiang basin, and arranged investigations, including national training on three occasions for 15 persons each time, and oversea training for 11 persons in Western Europe and Australia, and 7 workshops with 180 persons attending. The final report for the Lijiang water resources management plan was completed by project closure.
Guilin Environmental Improvements. Wastewater from the Qintan district was collected and transferred to No.4 STP through the construction of Qintan trunk sewer and Mantoushan pump station, which enabled the capacity of the No.4 STP to be fully utilized and reduced pollution discharging to the Lijiang. Suburban towns in Yangshou County also improved wastewater collection and treatment: the project financed a 2,500 m3/d oxidation pond in Baisha, and the two other towns constructed STPs of 20,000 m3/d using national bonds financing. Wastewater services in the Xicheng industrial area and township were improved through the project-financed sewer network, and the 30,000 m3/d STP constructed under a BOT contract. With the completion of Beichong STP and North district sewage pipeline, wastewater from Guilin north district (with 50,000 residents) was conveyed to the Beichong STP for treatment and then discharged into Taohuajiang, which reduced pollution in Lijiang and Taohuajiang. Water quality in the Lijiang was maintained at Class II, and water quality in the Taohuajiang was improved to Class IVV. Water quality in the Three Lakes improved significantly (to Class III) with the lake dredging and wastewater interception and treatment in the Lijiang tributaries. The solid waste collection and disposal rate increased from 70% to near 100% with the construction of the Chongkou landfill and the 800 ton capacity Jiashan transfer station. The improved environment has helped to make Guilin as one of the premier tourist destinations in China.
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Industrial Pollution Control. Guilin made a lot of progress in pollution control in the following industries: Guilin Monosodium Glutamate, Guilin Liquan Beer Limited Company, Guilin Sanjin Pharmaceutical Corporation, Guilin Sauce Factory, Guilin Jiqi Pharmaceutical Limited Corporation. The municipal government strengthened supervision management and directly notified units in 12 counties whose discharge was over standard to either improve or face closure. The 19 units which were notified by government, including Lipu Paper-making Limited Company and Lingui Wutong Paper-making Plant have achieved discharge standard since October 2000. In total, 815 enterprises in 12 counties have achieved the specified discharge standard since 2001.
Capacity Building/Institutional Development. Operations of GSC were enhanced and strengthened through: the introduction of financial and management systems, control of all revenue from the services provided, and the transfer of ownership of all assets to GSC; MIS, GIS system training and oversees training; and provision of advanced laboratory equipment and considerable in-country and external training for staff. GSC became a truly autonomous company, with enhanced capacity for monitoring and operation of sewerage facilities operation, and maintenance cost control. Capacity of the EPB increased the number of industries monitored, and also improved its monitoring capacity using the monitoring equipment and training provided under the project. Project management capacity was strengthened through consulting services that assisted project management and provided on-the-job training
The GSC achieved a greater degree of autonomy during the project: it acquired a business license; consolidated all sewerage assets under the company; and had full control of its revenue. GSC increased the tariff twice; first in 2002 (from RMB0.10 /m3 to RMB0.2/m3), and the second, in 2006 (from RMB0.20 /m3 to RMB0.65 /m3). However, it was difficult to comply with the financial covenant because tariff increases generally lasted for about three years and the tariff setting were impacted by the national consumer price index. GSC’s monitoring and analytical capacity was greatly strengthened with the installation of the monitoring equipment, which are operating smoothly.
The merger of the Guilin Prefecture with the Municipality facilitated the Lijiang water resources management, specifically, to maintain adequate flows in the Lijiang during the dry season.
EPB Strengthening: The EPB was strengthened by the purchase of office equipment, vehicles and monitoring equipment, and overseas and domestic training. The institutional and management capacity of the Guilin EPB was enhanced, especially in monitoring through improved accuracy, range and frequency. Improvement in EPB’s monitoring frequency and coverage is illustrated below:
Monitoring Performance of Guilin EPB Monitoring objective Base Year 1998 Objective 2007 Enterprise amount 10 13 58 Monitoring times annual Large and middle sized enterprise 1 2 4 Small-sized enterprise 1 2 2 River sections monitored and annual 1*1 3*3 3*12 frequency Water body monitoring items 7 13 26 monitoring of emergencies, (% 30 80 100% coverage) Average response time for 7 1 0.5 accidents, complaints (days)
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Poverty Alleviation and Economic Regeneration (Nanning and Guilin).
The small area improvement (SAI) works have brought livelihood improvements to a population of approximately 180,000 (i.e., 140,000 against the estimated 46,000 beneficiaries in Nanning, and about 40,000 against the estimated 27,000 beneficiaries in Guilin). The mix of investments, and hence the nature of the benefits, varies from area to area, but typically include protection from flooding, roads, footpaths, garbage collection, public toilets, etc. These improvements have increased property rental values, resulted in higher income levels for residents, and stimulated new local economic activity (e.g. from markets, shops and tourism). A broader outcome is that both Nanning and Guilin Municipal Governments used the SAI experience to develop and implement its own programs of street level- and village-centered improvements based on the SAI model.
Other project investments not only improved the environment, but also provided many job opportunities, and facilitated rural to urban migration. After Mantoushan pump station and Beichong STP completed, it provided more than 150 jobs; Chongkou landfill station provided 100 jobs, Shilong hydro power station and Baisha aeration pond provided 50 jobs. The SAI component facilitated economic development and community stabilization, and increased incomes and employment opportunities.
Overall, the Borrower believes that each individual component has at least achieved the objectives set, and in several cases the outcome of individual components exceeded expectations.
Major factors affecting implementation and outcome Factors outside the control of government or implementing agencies • The fast economic growth and pressures from rural to urban migration resulted in more rapid development and redevelopment in the inner suburbs of both Nanning and Guilin cities. This required significant changes to the sites originally selected for the SAI component. • Market price escalation on major construction materials during 2003 and 2004 caused problems for construction progress on some civil works contracts which had been bid on a fixed price basis. • The SARS outbreak in 2003 and Bird Flu concerns in 2005, temporarily disrupted the construction program due to movement restrictions that were imposed. In total these events resulted in a delay of over 6 months. • Serious floods in the summers of 2001 and 2006 also had a disruptive effect on the construction program, requiring some works to be suspended and others to be rescheduled. • Unexpected adverse geological conditions were experienced on some sewerage contracts - notably on Xiuxiang Road in Nanning. • Insistence by the World Bank to use a turnkey form of contract for which there was no readily available Chinese model document, resulted in procurement delays for the Dakengkou PS and Jiangnan STP sub-components in Nanning. • Due to requirements necessitated by other ongoing city development projects in Guilin, and shortage of counterpart funds, some components were postponed by about two years. • Unfamiliarity of design institutes with Bank procedures and requirements, delayed detailed design preparation by at least one year. • Counterpart funding problems affected implementation of Xicheng and Wulixia subprojects. • The unforeseen geological conditions in the karst topography of Guilin caused delays in civil works contracts.
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• Both Nanning and Guilin spent a large amount of time to understand World Bank procedures in procurement, construction management and contract management and disbursement, including the considerable time that elapsed to prepare disbursement applications. • The Project suffered cash flow problems, which severely impacted progress because of the long time (about 2 months) taken for the World Bank to process and reimburse disbursement applications. Factors generally subject to government control • Government reforms in 1999 resulted in the Guangxi Provincial Water Conservancy Bureau and Nanning Municipal Water Conservancy Bureau becoming responsible for urban flood control. This reform required these agencies, which had not previously been involved, to review and approve key aspects of the Project before work could proceed. Significant delays arose due to the lack of familiarity of these newly involved agencies, and resulted in a number of project issues taking longer than expected to resolve • Due to requirements necessitated by other ongoing city development projects in Guilin, some components were postponed by about two years. • Slow government approval of the ICB equipment contracts delayed the procurement process for pumping stations and Jiangnan STP. Use of turnkey contracts compounded the impact of this procurement delay. • Significant delays were experienced in the resettlement of persons occupying housing on the periphery of the Jiangnan STP site. • The Nanning Municipal Government imposed restrictions on road construction during key events, such as for ASEAN meetings. This had a disruptive effect on sewerage contracts in the city. • Some sewer contracts experienced delays due to the unexpected discovery of electricity cables, the location of which had not been accurately recorded by the electric utility. • The government decision-making process over the use of loan savings was somewhat slow and cumbersome and could usefully be improved for any future World Bank project. • Shortage of counterpart funds caused delays in several Guilin sub-components. Factors generally subject to implementing agency control • Cost estimation at appraisal was inaccurate. Costs estimated at appraisal were generally much higher than actual contract prices, affecting the loan disbursement progress and causing large loan savings. • Implementation agencies were initially unfamiliar with World Bank procedures and requirements, which resulted in most components taking longer than expected to get implementation underway. This was especially the case where the implementing agencies (IA) either wanted to make changes to the appraised component, or where the WB appraisal had left significant design issues in abeyance.
Economic Benefits The Borrower notes that the SAR economic rate of return (ERR) of 21% in direct benefits was estimated for the entire GUEP, but there is no link given as to how that ERR was calculated from the individual subproject economic benefits/justifications, which were evaluated using various different methods. There is also inadequate reference in the SAR to identify the detailed data sources to allow subproject re-evaluations. The Borrower has therefore not attempted to replicate the calculations made at the SAR stage. However, general public health indicators for Nanning city suggest much progress has been made in the last 10 years. As documented in this report, a significantly greater level of asset construction has proved possible than was envisaged at the time of appraisal for the same level of investment. It therefore follows that the economic rate of return must be significantly greater than initially estimated.
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Project Sustainability
Overall Sustainability Assessment The Borrower recognises that sustainability of the Project needs to be viewed in terms of (a) whether an appropriate institutional arrangement has been set up to provide for managerial autonomy and sustainability; (b) the ability to operate and maintain the facilities; and (c) financial sustainability. In the Borrower’s view, the overall Project can be considered sustainable against these criteria. Institutional and financing arrangements segregate the services provided between commercial activities, where a user fee can be applied, and those of a general public good funded by the Municipal Governments. GSC, in conjunction with the Guilin Municipal Government plans to prepare and implement a program over the next three years, to achieve financial sustainability in a phased manner.
Other Institutional Responsibilities
Other assets constructed under the Project are operated and maintained as follows: • The Dakengkou Stormwater Pumping station is now operated and maintained by the Flood Control Department of Nanning Water Conservancy Bureau (WCB), and funded by NMG. • Chaoyang Stream maintenance (debris removal, embankments etc) is the responsibility of the NWCB’s Inland Waterway Management Department and also funded by NMG. • Stormwater and remaining combined sewers are managed by the Sewerage Management Department under the leadership of Municipal Management Bureau and funded by NMG. • Nightsoil Collection and Disposal Services are managed by District Government Environmental Sanitation Departments. This service is partly local government funded (in relation to public toilets and public buildings), and partly by charges levied for services to privately owned septic tanks. .
All the agencies described above are adequately staffed and financed for their current responsibilities and there are no significant skills shortages. A budgetary constraint in 2007 that limited the pumping of water from the Yongjiang to flush Chaoyang stream during periods of low flow has now been overcome.
Operational Sustainability
The Bank funded investments have been constructed to good quality standards with no obvious inherent design weaknesses identified to date. However, Jiangnan STP only became operational in September 2007 and some WB funded sewer works have also only recently been completed. Industrial pollution discharging to municipal sewers is considered to be reasonably well under control and is not giving rise to significant problems in wastewater operations or compromising the ability of the STP to meet discharge standards. The Guilin STP and the Langdong STP in Nanning have mature operating systems and experienced staff. ISO 9000; 2000 systems have been introduced to enhance internal management levels, work efficiency, service quality and staff performance. Based on the operational performance of Langdong STP, in 2006, NSC was awarded “Class A Qualification for Operation of Environmental Protection Facilities” by the State Environment Protection Administration (SEPA). These systems are being transplanted into the new Jiangnan STP and Langdong Phase II (JBIC funded).
Financial Sustainability In Nanning, the financing of operations and maintenance of the different project services is either from the wastewater charge (for the commercial operations of wastewater collection and treatment) and from Nanning Municipal Government Budget for services providing a general public benefit (such as public toilets, inland rivers, rainwater drainage and flood control). Thus financial sustainability depends
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essentially on the level of wastewater tariff and the income it generates and also on the ability of NMG to fully fund the public services. Nanning Government is fully conscious of the flood risk to the City with drainage and flood protection given high priority in the budget allocation process. The rapid economic growth in Nanning has resulted in a similarly rapid growth in government revenues and budgets, and NMG is now much better placed to sustain and improve budget allocations than at the time of the Project’s appraisal.
Since appraisal Nanning has made a series of tariff increases such that the 2007 tariffs are significantly higher than was assumed at appraisal. The wastewater tariff in Nanning generated sufficient wastewater revenues for NWTC (then still NSC) to meet its financial obligations for O&M and debt-servicing in all years up to and including 2006, together with an operating surplus. It is forecast that NWTC will also make a surplus in 2007, but the final figures are not yet available. A tariff increase to a level of RMB0.80 /m3 or RMB0.90/m3 was anticipated in the first half of 2008, although implementation is currently suspended due to the Government’s anti-inflation drive. This level of wastewater tariff will allow NSC to meet its financial covenants until at least 2010. Income collection performance averages 90%, and is considered satisfactory. All proceeds from the wastewater tariff are remitted directly in full to NSC, which allows the Company to monitor income collection performance and gives it the financial autonomy envisaged in the SAR.
Guilin was not able to fully comply with the financial covenant in the project agreement. The objective was to raise sewerage tariff to balance revenues and expenditures, and repay the loan, and have funds for future expansion of facilities. The sewerage tariff was raised twice: first in 2002, from RMB0.10 /m3 to RMB0.20 /m3, , and the second time in 2006 from RMB0.20 /m3 to RMB0.65 /m3. According to the estimate of the Word Bank, the sewerage tariff needed to be increased RMB0.85 /m3 in 2007 to achieve financial viability as an autonomous company. Guilin faces some difficulties raise tariffs every year because the new tariffs are maintained for several years before revision, and consistent with the national controlled index of market price in Guangxi. However, Guilin will prepare a practical plan to formulate an adequate tariff structure to meet requirements within three years of the project completion.
Bank and Borrower Performance
Bank Performance The World Bank’s performance has been generally satisfactory. The Bank’s staff involved in this project provided very useful assistance, advice, guidance, training and supervision to the staff of the different project agencies, and the diligence of Bank staff was very much appreciated. Bank involvement has also been helpful in optimizing the technical performance of the Project. Generally, our view is the performance of the Bank has improved as the Project progressed. In total, there have been four task managers assigned to the project. With the first three task managers, who were based in Washington, communication was not always easy and also there seemed to be a presumption that international experience was always relevant to the local situation. Whilst there was almost always consensus over the problems to be solved there were differences over how best to solve those problems in the particular circumstances of Nanning and Guilin. Since the appointment of the Beijing-based national staff as Task Manager, together with Bank reforms leading to the transfer of supervisory responsibility to the Bank’s Resident Mission in Beijing, we feel that communications with the Bank greatly improved, and also there has been a greater understanding of local circumstances by the members of the Bank supervisory team. This helped to resolve issues that had earlier caused difficulties, and created a genuine atmosphere of partnership between Guangxi Region and the Bank. The Bank has also shown flexibility in its relationship with Nanning and Guilin cities in agreeing (i) to extend the loan period; (ii) changes to
- 61 - the scope of work; and (iii) increasing the percentage of disbursement. This flexibility has been much appreciated. Borrower Performance The national, Guangxi Region, municipal and district level governments have all been very committed to, and supportive of the project during its inception, preparation and implementation. Strong efforts have been made by all the implementing agencies and the Nanning and Guilin PMOs to resolve issues encountered at every phase of the Project. The Nanning and Guilin PMOs occupied the pivotal role in coordinating the efforts of the different agencies involved in the implementation, and received high levels of cooperation. The PMOs have worked hard to improve their effectiveness, especially in the areas of project implementation planning and project management systems. Stable PMO staffing in Nanning throughout the project lifecycle and project management changes made in Guilin, progressively enhanced performance after the slow and difficult start. B. Lessons learned
The implementation of the Guangxi Urban Environment Project was coordinated by Nanning and Guilin PMOs, acting on behalf of the two Municipal Governments. The PMO staff learned many detailed lessons from this experience which they hope to be given the opportunity to apply during future projects. The transfer of increased responsibilities to the World Bank to the Resident World Bank Mission in Beijing has brought the Bank closer to its customers, and devolving functions should continue to further improve responsiveness. Project Specific Lessons Project Design • The reluctance of the Bank to accept the requirement for full secondary treatment at Jiangnan, despite national policies requiring this, caused significant delays. • Ensuring wastewater collection and conveyance systems are constructed in advance allowed the Jiangnan STP investment to be immediately effective with a guarantee of the full design flow. The availability of the full flow also allowed for a more thorough testing of the STP during the commissioning stage, giving a greater level of protection of the owner’s interests.
Procurement and Construction Management Lessons • Cost estimates and contingency provisions used at appraisal, proved excessive; more realistic cost data should have been obtained and used at appraisal stage. • Use of the turnkey form of contract (for which no suitable model form existed) created procurement delays and yet appeared to give no obvious advantage during the construction stage. • The Project introduced the construction techniques of “pipe-jacking” and other trench-fewer methodologies to Nanning so that these are now in regular use in the city; with a consequential reduction in disruption caused by open trench construction. • Competitive procurement has been accepted as leading to providing greater value for money than traditional local methods. Consulting Services • The use of a single consulting services package for construction management and institutional strengthening worked well, and the Consultants undoubtedly made a positive contribution to the implementation of the Project.
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• For various reasons the TA Consultant was not mobilised until March 2001, some two and a half years into project implementation. In hindsight the consultants should have been mobilised much earlier, and also they should have been involved in project implementation support from the outset. • The time originally allowed for completion of the institutional part of the work (2 years) was overly optimistic and did not take account of the immature state of NSC and GSC as an embryo wastewater companies at the time of consultants mobilisation. Institutional Development and Financial • Whilst reform objectives as appraised by the Bank have remained valid, the detailed reforms had to be modified as circumstances and government policies (national and local) changed. • The TA consultant’s suggestions and their experience both in China and internationally, were helpful in shaping the reform strategy eventually adopted by NMG. • GUEP has proved a useful catalyst for motivating and testing institutional reforms. Small Area Improvements • Lessons from the SAI initiative have been incorporated into Nanning Government’s own local neighbourhood improvement program. • The involvement of social workers in working with local communities to enhance levels of participation and consultation, and to ensure project content and design to meet local needs, has been a great success.
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Annex 10. List of Supporting Documents
The following is a list of key documents relating to GUEP:
1. Project feasibility studies and project proposal 2. Water Resources Master Plan for Nanning 3. Water Resources Master Plan for Guilin 4. Updated Urban Development Plan for Guilin 5. Staff Appraisal Report 6. Loan Agreement 7. Development Credit Agreement 8. Project Agreement 9. Mission Aide Memoires and Back-to- Office reports 10. Implementation Status Reports 11. Semi-annual Project Progress Reports 12. Nanning Pollution Source Control Program Implementation Report (Nanning EPB) (January 20, 2008)
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MAPS CH29651R, CH28799R, CH28800R and CH36180
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