Report and Recommendation of the President to the Board of Directors

Sri Lanka Project Number: 40665 November 2008

Proposed Loan People’s Republic of : Basin Water Pollution Control and Management Project

CURRENCY EQUIVALENTS (as of 5 November 2008)

Currency Unit – yuan (CNY) CNY1.00 = $0.1463 $1.00 = CNY6.836

ABBREVIATIONS

ADB – Asian Development Bank BOD – biological oxygen demand EIA – environmental impact assessment EMP – environmental management plan FIRR – financial internal rate of return FYP – five year plan IA – implementing agency HPG – provincial government HPMO - Heilongjiang project management office JPG – provincial government JPMO – Jilin project management office JWSSD – Jilin water supply and sewerage development JUEI - Jilin urban environmental improvement LIBOR – London interbank offered rate MEP – Ministry of Environmental Protection O&M – operation and maintenance PLG – project leading group PMO – project management office PPMS – project performance monitoring system PRC – People’s Republic of China SEIA – summary environmental impact assessment SOE – statement of expenditures SRB – Songhua River Basin SRBPCMP – Songhua River Basin Water Pollution Protection and Control Master Plan SWM – solid waste management TA – technical assistance WWTP – wastewater treatment plant

WEIGHTS AND MEASURES km – kilometer km2 – square kilometer m2 – square meter m3 – cubic meter m3/day – cubic meter per day

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December. (ii) In this report, “$” refers to US dollars.

Vice-President C. Lawrence Greenwood, Jr., Operations 2 Director General K. Gerhaeusser, East Asia Department (EARD) Director A. Leung, Social Sectors Division, EARD

Team leader S. Penjor, Principal Financial Analysis Specialist, EARD Team members F. Asistin, Senior Programs Officer, EARD M. Gupta, Social Development Specialist, EARD C. Navarro, Project Officer, EARD X. Peng, Principal Counsel, Office of the General Counsel S. Popov, Senior Environment Specialist, EARD S. Pu, Investment Specialist, Private Sector Operations Department W. Walker, Social Development Specialist, EARD L. Wang, Programs and Regional Cooperation Officer, EARD

CONTENTS Page

LOAN AND PROJECT SUMMARY i

MAPS

I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 3 III. THE PROPOSED PROJECT 8 A Impact and Outcome 8 B. Outputs 8 C. Special Features 9 D. Project Investment Plan 10 E. Financing Plan 10 F. Implementation Arrangements 11 IV. PROJECT BENEFITS, IMPACTS, AND RISKS 16 A. Project Impacts and Benefits 16 B. Social Dimensions 16 C. Financial Aspects 19 D. Economic Aspects 20 E. Environmental Aspects 20 F. Project Risks and Mitigation Measures 21 V. ASSURANCES 21 A. Specific Assurances 21 VI. RECOMMENDATION 22

APPENDIXES

1. Design and Monitoring Framework 23 2. Urban Sector Analysis 27 3. External Assistance 30 4. Detailed Description of Project Components 32 5. Cost Estimates and Financing Plan 36 6. Flow of Funds and Onlending Arrangements 38 7. Implementation Schedule 40 8. Procurement Plan 43 9. Summary Resettlement Plan 53 10. Summary Poverty Reduction and Social Strategy 57 11. Financial Analysis 61 12. Economic Analysis 63

SUPPLEMENTARY APPENDIXES

A. Description of Each Project County and City B. Policy Dialogue C. Detailed Cost Estimates and Financing Plan D. Financial Management Assessment E. Institutional and Capacity Building Needs Assessment of Project Management Offices and Implementing Agencies F. Detailed Procurement Plans for Heilongjiang and Jilin G. Retroactive Financing H. Outline Terms of Reference for Consultants I. Social and Poverty Impact Assessment J. Health Impact Analysis K. Detailed Financial Analysis L. Detailed Economic Analysis M. Full List of Loan Assurances

LOAN AND PROJECT SUMMARY

Borrower People’s Republic of China (PRC)

Classification Targeting Classification: Targeted intervention Sector: Water supply, sanitation, and waste management Subsector: Integrated Themes: Inclusive social development, environmental sustainability, sustainable economic growth Subthemes: Human development, urban environmental improvement, fostering physical infrastructure development

Environment Category A. A summary of the environmental impact assessment was Assessment circulated to the Board of Directors of the Asian Development Bank (ADB) along with two environmental management plans on 11 July 2008, and uploaded to the ADB website on 11 July 2008.

Project The Project is a key urban environmental improvement initiative of the Jilin Description provincial government (JPG), and the Heilongjiang provincial government (HPG) to control pollution in the Songhua River Basin (SRB). It is classified as a targeted intervention because it contributes to achieving Millennium Development Goal 7, Target 10, which calls for the halving of the proportion of people without access to safe drinking water and improved sanitation by 2015. The Project will help to (i) reduce water pollution, (ii) protect water resources, (iii) address water shortages (by recycling effluent) and meet the demand for high-quality treated water through 2015, (iv) control nonpoint source pollution through effective solid waste management (SWM), (v) promote sustainable economic development, and (vi) improve the environment and living conditions in the project counties and cities (see footnotes 9 and 10 in the main text) in Jilin and Heilongjiang provinces. The Project has three components, five subcomponents, and 20 activities. The components are (i) an improved and expanded water supply and wastewater services in 11 counties and cities in Heilongjiang province; (ii) improved and expanded wastewater facilities and SWM in 15 counties and cities in Jilin province; and (iii) capacity development and training on project management, institutional and SWM and wastewater management, and tariff reform for all the project implementing agencies (IAs). The Project supports the Government’s 11th Five Year Plan (FYP) which includes the goals of improving living conditions and health in cities and promoting sustainable economic development. It also supports the Songhua River Basin Water Pollution Prevention and Control Master Plan (SRBPCMP), which calls for improving water quality in the SRB from the current class IV, V and below V to class III by 2020.

The proposed Project catalyzes both government and private investments aimed at reducing pollution in the SRB. The ADB East Asia Department (EARD) and the Private Sector Operations Department (PSOD) are adopting a public–private partnership approach to address the large wastewater treatment funding needs of Heilongjiang Province. PSOD is preparing a project for the Tsinghua Tongfang Water Engineering Company Limited (TTWE) which is currently managing the largest wastewater ii

treatment plant in . The PSOD project would support TTWE through the provision of equity of $12 million, or 20% of equity capital, whichever is lower, and loans for the management of wastewater treatment plants in other cities in Heilongjiang. TTWE is focusing on the water and wastewater sector business and is exploring private–public participation (PPP) opportunities with the local governments. Through an equity investment of $3.4 million, TTWE is a minority shareholder in the City Central wastewater treatment plant (WWTP) and effluent reuse subproject included in the proposed Project. This subproject will be financed by the ADB loan, local government counterpart funds, and private sector funds. The TTWE investment would (i) solve the funding shortage at Qitaihe, and (ii) improve the management and operational efficiency at Qitaihe through training provided by TTWE. This pilot demonstration subproject could be replicated in other subprojects in Heilongjiang, and then in Jilin province.

The proposed Project would significantly increase the wastewater treatment capacity in medium-sized and small cities and counties in Heilongjiang and Jilin provinces. ADB is also conducting a study on nonsovereign lending in urban infrastructure development in the PRC. The public–private sector approach to the wastewater treatment sector could be replicated in Jilin province and elsewhere in the PRC. HPG and JPG plan to invest $1.655 billion to increase wastewater treatment capacity and reduce pollution in the Songhua River in the 11th FYP. The proposed Project accounts for 23% of this effort, demonstrating its strong catalytic impact in mobilizing resources aimed at SRB pollution control.

Rationale The project counties and cities of Heilongjiang province (with an urban population of 7.04 million) and Jilin province (an urban population of 2.90 million) are located along the SRB. The SRB is the third largest river basin in the PRC, and it covers sections of Jilin and Heilongjiang provinces and the autonomous region of . The Songhua River is severely polluted with organic chemicals, heavy metals, and conventional pollutants, and this constrains sustainable economic development in the region. Underdevelopment of wastewater collection and treatment in the project counties and cities in Heilongjiang province and Jilin province leads to untreated wastewater being discharged into local rivers, and eventually to the pollution of the SRB. Water quality in some sections of the Songhua River and its tributaries does not meet class V of the PRC Surface Water Quality Standard. The lack of adequate wastewater management degrades local rivers, poses a threat to public health, and adversely affects the quality of life in the project counties and cities. Those in Heilongjiang province rely primarily on surface water for their water supply. Under normal conditions, water demand is expected to exhaust developed capacity in the project counties and cities by 2010. These counties and cities experienced supply problems during a severe episode of drought in 2004, leading to dangerously low water levels in the reservoirs and a resulting loss of effective treatment plant capacity. They also experienced low pressure and supply interruptions. The project counties and cities in Jilin province have domestic SWM featuring domestic waste pick-up, extensive informal recovery of recyclables, and disposal in a managed landfill. Given that existing landfill sites will be fully utilized within 2 years, construction of new

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facilities is urgently needed. The Project will contribute significantly to control of water pollution in the local rivers and in the SRB. It will also help solve the current water shortage problems in the project cities and meet the future demand for high-quality treated water.

In 2002, during the processing of the Harbin Water Supply Project ($100 million), ADB had extensive discussions with the Government on addressing pollution control in the SRB. Consequently, ADB provided a technical assistance (TA) project for the Songhua River Basin Water Quality and Pollution Control Management. The TA, which was considered highly successful, provided strategic policy inputs to the SRBPCMP. The SRBPCMP is a Government-approved action program that sets pollution control targets from 2006 to 2010 and is designed to control urban environmental pollution and ecological damage by 2010.

The Jilin Water Supply and Sewerage Development (JWSSD) Project ($100 million), approved in 2005, was the first major ADB investment directly addressing pollution control in SRB. The Jilin Urban Environmental Improvement (JUEI) Project ($100 million), approved in 2007 was the second, and follows the priority list of SRBPCMP. The proposed Project, with an indicative ADB loan of $200 million, will be the third major ADB investment in the SRB, and follows the priority list of SRBPCMP. A “leading group” with members from the National Development and Reform Commission; Ministry of Environmental Protection; Ministry of Water Resources; and the provincial governments of Heilongjiang, Jilin and Inner Mongolia, is responsible for overseeing the preparation and implementation of the SRBPCMP. The proposed Project will complement the SRB pollution control efforts underway through the ongoing JWSSD and JUEI projects. This comprehensive strategic approach to addressing pollution control in the SRB will serve as a model for demonstration and replication elsewhere in the PRC.

Impact and The Project will enhance the urban environment and improve public health Outcome and the quality of life for urban residents in the project cities and counties in the provinces of Heilongjiang and Jilin. This will be achieved by increasing wastewater treatment coverage, enhancing SWM, and improving the supply of potable water. The outcome of the Project will be less pollution and better water supply, wastewater management, and SWM in the SRB.

Cost Estimates The investment cost of the project is estimated at $396.3 million equivalent, including taxes and duties of $11.06 million.

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Financing Plan Amount Source ($ million equivalent) % of Total Asian Development Bank 200.0 50.5 State bonds, Heilongjiang 46.4 11.6 Local government equity, Heilongjiang 44.6 11.3 State bonds, Jilin 19.7 5.0 Local government equity, Jilin 78.4 19.7 Tariffs 3.5 0.9 Private sector equity (Tsinghua Tongfang) 3.4 0.9 Domestic banks 0.3 0.1 Total 396.3 100.0 Source: Asian Development Bank estimates.

ADB will provide a loan of $200 million to finance 50.5% of the project cost, including financing charges during construction. The Government will finance 49.5% through a combination of water and wastewater tariffs, domestic bank loans, state bonds, and capital infusions from the county and city governments.

Loan Amount and ADB’s loan of $200 million will come from its ordinary capital resources and Terms will be provided under ADB’s London interbank offered rate (LIBOR)-based lending facility for US dollar loans. The loan will have a 25-year term, including a grace period of 5 years, an interest rate based on ADB’s LIBOR-based lending, a commitment charge of 0.15% per year, and such other terms and conditions as set forth in the draft Loan and Project Agreements.

Allocation and From the total loan proceeds, the Government of the PRC will make Relending Terms $100 million available to HPG and $100 million to JPG. HPG and JPG will make the loan proceeds available to the concerned county and city governments on the same terms and conditions as those of the ADB loan; the loan proceeds will then be onlent to the implementing agencies (IAs) on the same terms and conditions. The IAs will bear the risks of foreign exchange and interest rate variation for their portion of the loan proceeds, and undertake to perform the obligations as provided in the Project Agreement applicable to the IAs.

Period of Until 30 June 2014 Utilization

Estimated Project 31 December 2013 Completion Date

Implementation HPG is the Executing Agency (EA) for the Heilongjiang component. JPG is Arrangements the EA for the Jilin component. HPG and JPG have established project leading groups (PLGs), each chaired by a vice governor. These will provide overall policy guidance, facilitate inter-agency coordination, and resolve any institutional problems affecting project implementation. The Heilongjiang PLG consists of members from the Heilongjiang Provincial Development and Reform Commission, Heilongjiang Provincial Finance Bureau, the Heilongjiang Provincial Audit Bureau, and the Heilongjiang Environmental Protection Department. The Jilin PLG consists of members of the Jilin

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Provincial Development and Reform Commission, Jilin Provincial Finance Bureau, and Jilin Provincial Environmental Protection Department. As they are members of the leading group for the SRBPCMP, the two vice governors will be able to ensure effective coordination between the two provinces in implementing the proposed Project. HPG and JPG have also established project management offices (PMOs), each with a director and staff. The project county and city governments in Heilongjiang and Jilin have established similar organization structures including PMOs chaired by vice mayors. The county and city PMOs will maintain interdepartmental coordination and work closely with Heilongjiang and Jilin PMOs.

Executing Heilongjiang provincial government, Jilin provincial government Agencies

Procurement All procurement of goods and works will be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time). Contracts for goods estimated to exceed $1.0 million and contracts for works estimated to exceed $10.0 million will be procured using international competitive bidding (ICB) procedures. Contracts for goods and contracts for works estimated to be equal to or less than the above ICB values, but more than $100,000, will be procured on the basis of national competitive bidding procedures in accordance with the PRC Tendering and Bidding Law (1999), subject to modifications agreed with ADB. Contracts for goods and works estimated to cost $100,000 or less will be procured using shopping procedures.

Consulting For Heilongjiang, about 25 person-months of international consultant Services expertise and 83 person-months of national consultant expertise will be required. For Jilin, about 20 person-months of international consultant expertise and 71 person-months of national consultant expertise will be required. Consulting services are required for (i) providing design review and advisory services to ensure that the technical specifications, detailed design drawings, and implementation schedules properly address all technical issues, complying with engineering norms, and are up to date; (ii) supporting project management; (iii) establishing the project performance management system; (iv) preparing a strategy for reduction of nonrevenue water along with a time-bound action plan for water supply; (v) conducting social, environmental, and resettlement monitoring; (vi) supporting financial management; (vii) helping with private sector participation initiatives; (viii) providing training on project management, procurement, and construction supervision as well as on how to operate the wastewater collection and treatment facilities, SWM facilities, and the water supply treatment and distribution systems; and (ix) improving operation and maintenance (O&M). Two consulting firms (one for each province) will be recruited in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).

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Project Benefits The Project will benefit about 9.94 million urban residents in the project and Beneficiaries counties and cities in Heilongjiang province and Jilin province, whose living conditions and public health standards will be improved by (i) better water supply, wastewater services, solid waste management, and less nonpoint source pollution through increased SWM capacity; (ii) a lower incidence of waterborne diseases to below 2007 levels (to be monitored through the project performance management system); and (iii) saved water through water reuse and a reduction in unaccounted-for water.

The Project will result in better management and utilization of water resources, and a reduction in pollution in the SRB, bringing positive and transjurisdictional benefits to the provinces of Heilongjiang and Jilin. The water quality improvements in the SRB will also contribute to integrated water resource management and pollution control, a basin-wide management program; and transboundary pollution prevention and control. The Project will secure the provision of clean and reliable water supply to the project counties and cities in Heilongjiang province by developing new drinking water sources. The proposed extension, replacement, and rehabilitation of water distribution systems will increase the proportion of the population with access to piped water supplies. These improvements in the distribution system will reduce water losses and reduce the risk of contamination of treated water within the distribution system. Recycling wastewater will reduce water pollution and address the water shortage.

Of the total beneficiary population, about 325,000 persons in Heilongjiang (4.62%), and 355,000 persons in Jilin (12.24%) are classified as poor measured by the weighted average local urban poverty line of CNY2,196 per person per year. Major social measures to protect urban residents from falling into poverty include (i) a living allowance for laid-off employees, (ii) unemployment insurance, and (iii) a social support program under the minimum-living-standard scheme. Further, the county and city governments have agreed to implement poverty reduction measures, including (i) providing lifeline tariffs, (ii) offering water bill discounts or cash rebates amounting to 20–30% of monthly water bills for households living below the poverty line, and (iii) connecting the poorest households to tap water. The Project will create a minimum of 1,380 person-years of direct long–term employment during operation of the facilities, and 6,620 person-years of direct short-term employment during the 5-year construction period. About half of the construction jobs are unskilled and will be probably be filled by currently unemployed persons. Public health benefits will accrue through (i) a reduction in waterborne and airborne diseases, (ii) savings on medical treatment costs, and (iii) improved workforce productivity. The Project is technically sound, affordable to beneficiaries, and financially and economically viable.

Risks and The following risks could affect the timely implementation and economic Assumptions viability of the Project, and reduce its benefits: (i) amendments and changes to the project county and city master plans; (ii) lack of proper operation and maintenance of project facilities; (iii) ineffective organizational structures and inadequate capacity of the IAs, which could result in

vii inefficient project development and delayed implementation; (iv) delays in the provision of counterpart funding; (v) failure of the project county and city governments to increase water, wastewater, and solid waste tariffs to meet cost recovery targets; and (vi) unforeseen land acquisition and resettlement issues, which could constrain the efficient implementation of the project works and the restoration of livelihoods of the affected persons. The Project does not have any unusual technical risks.

The project components will use technology that conforms to international standards. Specific construction risks will be mitigated by the use of experienced consultants to prepare designs and monitor project implementation.

Map 1

118o 00'E 130o 00'E

SONGHUA RIVER BASIN WATER POLLUTION CONTROL AND MANAGEMENT PROJECT IN THE PEOPLE'S REPUBLIC CHINA

Project Provinces National Capital Provincial Capital City/Town Road

Mohe River Tahe Provincial Boundary International Boundary o o 52 00'N Boundaries are not necessarily authoritative. 52 00'N

Elunchun Zizhiqi

Manzhouli Hailar Nenjiang Wuyiling Bei'an Tongjiang Xin Baraq Zuoqi HEILONGJIANG

Yirshi Nancha Jixian

Daqing Yilan Anda Harbin Qitaihe

Acheng Linkou Da'an Fuyu INNER MONGOLIA Wuchang AUTONOMOUS REGION

Abag Qi Bairin Zuoqi Jilin Tongliao Tumen Siping J I L I N

Liaoyuan Dongfeng Zhengxiangbai Tieling Chifeng Fuxin Chaoyang Chengde Jinzhou Nanfen

Zhangjiakou Yingkou Dandong 40 o 00'N N 40 o 00'N Shanhaiguan

0 50 100 150 200 Bazhou TIANJIN Kilometers H E B E I Bohai Sea

118o 00'E 130o 00'E

08-2629a HR o o 121 00'E 132 00'E

SONGHUA RIVER BASIN WATER POLLUTION CONTROL AND MANAGEMENT PROJECT

Mohe LOCATION OF SUBPROJECTS IN HEILONGJIANG PROVINCE N IN THE DAXINGANLING REGION H PEOPLE'S REPUBLIC OF CHINA ei 0 100 200 300 lo Tahe ng R iv Kilometers er

Tangyuan County Nenjiang County Wastewater Treatment Plant Wastewater Treatment o 3 o 52 00'N Plant Capacity: 10,000 m /d 52 00'N Water Supply Capacity: 15,000 m3/d 3 Heihe Capacity: 10,000 m /d

Shuangyashan City Anbang River Basin Wastewater Treatment Plant Xun R. HEIHE Capacity: 50,000 m3/d r Water Supply Expansion e iv Nenjiang iver R R 3 n ng Capacity: 20,000 m /d Qiqihar City Central Town e eilo N H Wastewater Treatment Plant Namoer R. Phase II Fujin City 3 Wastewater Treatment Capacity: 100,000 m /d . uer R YICHUN Tongjiang Plant Wuy FUJIN QIQIHAR Baiquan Hegang r 3 e Capacity: 20,000 m /d Yichun Fujin v i

R

Qiqihar Tangyuan i l

u HEILONGJIANG s Jiamusi u Jiamusi City East INNER MONGOLIA Jixian W JIXIAN Wastewater Treatment AUTONOMOUS REGION River Plant + Effluent Reuse SUIHUA a Baoqing 3 Capacity: 40,000 m /d Anda ghu Yian QITAIHE Son Tonghe Qitaihe Hulin HARBIN Qitaihe City DAQING JIXI Provincial Capital HARBIN Fangzheng Jixi Effluent Reuse Yanshou City Seat Xinyigou Linkou 3 Shangzhi . Capacity: 40,000 m /d

Town/County R Xingkai Lake

Wuchang n a

Water Supply Subproject Hailang R. d u Suifenhe

Harbin City M Wastewater Management Subproject o Xinyigou Wastewater Mudanjiang Wastewater Treatment o 44 00'N Treatment Plant Plant and Sewerage Network 44 00'N River MUDANJIANG Prefecture Boundary Capacity: 100,000 m3/d Capacity: 6,000 m3/d Provincial Boundary International Boundary Boundaries are not necessarily authoritative. Water Supply Expansion Water Supply Expansion

0 J I L I N 8 M -

2 3 3 6 Capacity: 10,000 m /d Capacity: 9,500 m /d a 2 9 p b

H o o 2

R 121 00'E 132 00'E o o 123 00'E 129 00'E

SONGHUA RIVER BASIN WATER POLLUTION CONTROL AND MANAGEMENT PROJECT Da'an City Solid Waste Management SUBPROJECTS IN JILIN PROVINCE

3 Fuyu County IN THE Capacity: 524,610 m Wastewater Treatment Plant PEOPLE'S REPUBLIC OF CHINA 3 Capacity: 10,000 m /d Solid Waste Management

3 Yushu City Capacity: 2.13 million m Wastewater Treatment Plant o o 46 00'N Capacity: 10,000 m3/d 46 00'N Dehui City Wastewater Treatment Plant Baicheng Jiaohe City 3 Yushu City Solid Waste Management Capacity: 10,000 m /d Da'an Solid Waste Management Capacity: 1.78 million m3 Tongyu Capacity: 1.4 million m3 City Fuyu Huadian County Sewage Network Upgrade SONGYUAN HEILONGJIANG BAICHENG Yushu Solid Waste Management

Capacity: 550,000 m3 INNER MONGOLIA CHANGCHUN

Dehui Gongzhuling City Wastewater Treatment Plant Fanjiantun Town CHANGCHUN Jilin Wastewater Treatment Plant Capacity: 20,000 m3/d Capacity: 20,000 m3/d SIPING J I L I N Jiaohe Shuangyang JILIN Gongzhuling Jingyu County Solid Waste Management Solid Waste Management Siping YANBIAN Capacity: 550,000 m3 Capacity: 1.44 million m3 Huadian LIAOYUAN City Wastewater Treatment Plant Solid Waste Management Huinan Meihekou Capacity: 20,000 m3/d Capacity: 3.60 million m3 o TONGHUA Jingyu o 42 00'N Liuhe Fusong Fusong County 42 00'N Solid Waste Management Baishan Provincial Capital Tonghua 3 L I A O N I N G Changbaishan Capacity: 657,000 m City Seat

Town/County Changbaishan Mountain Wastewater Management Subproject Administrative Committee

Urban Solid Waste Management Subproject Changbaishan River Improvement Wastewater Treatment Plant River Capacity: 15,000 m3/d Prefecture Boundary N Provincial Boundary Liuhe County Solid Waste Management Wastewater Treatment Plant International Boundary 3 3 0 20 40 60 80 100 Capacity: 3.60 million m Capacity: 10,000 m /d 0 Boundaries are not necessarily authoritative. 8 M - 2

6 Kilometers a 2 9 p c

H o o

123 00'E 129 00'E 3 R

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to the People’s Republic of China (PRC) for the Songhua River Basin Water Pollution Control and Management Project.

2. In line with its long-term goals to improve the urban environment and control pollution in the Songhua River Basin (SRB), the Government requested the Asian Development Bank (ADB) to help increase the water supply, wastewater treatment, and solid waste management (SWM) capacity in Jilin and Heilongjiang provinces in the northeast of the PRC. The Project is consistent with ADB’s water policy1 and will help the PRC achieve Millennium Development Goal 7, target 10 which calls for a halving of the proportion of people without access to safe drinking water and improved sanitation by 2015. This report is based on the findings of the Loan Fact-Finding Mission and discussions with the central and local governments, relevant agencies, and community organizations. The design and monitoring framework is in Appendix 1.

II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES

A. Performance Indicators and Analysis

3. Since the PRC initiated economic reforms in 1978, continuous economic growth has been accompanied by rapid urbanization. The urban population has grown from 160 million in 1975 to about 577.1 million in 2006. The urbanization rate increased from 17% to 43.9% in the same period, and is expected to reach 55% (or about 700 million) in 2030. This rapid urbanization over three decades of economic reform was largely fueled by the transformation of suburban areas from farming to nonfarming activities, and by the massive migration of surplus rural labor to urban areas. The number of cities in the PRC increased from 193 in 1978 to 661 in 2006. There are also 19,522 towns. Of the total urban population of 577.1 million in 2006, an estimated 115.5 million (20%) live in small cities and 239.1 million (41%) in towns.2 The Government highlighted sustainable urbanization as a key policy priority in the 11th Five-Year Plan (FYP), 2006–2010.

4. Rapid urbanization in the PRC has taken a severe toll on the environment, and has also challenged the capacity of local governments to promote good governance, effective planning and management, sustainable financing, and timely delivery of public services. While significant progress has been made in building urban infrastructure over the past two decades, it tends to be concentrated on the more highly developed eastern and southern coastal plains. The expansion and upgrading of public services has not kept pace with rapid industrial growth. The migration to urban centers currently taking place in the inland regions (in response to government policies to promote economic development and job creation in these areas) is putting a further strain on urban infrastructure and services.

5. Cities in the north and west and around the SRB are experiencing widespread pollution caused by the discharge of untreated wastewater and improper management of solid waste. Shortages of safe drinking water are also common, particularly in the north of the PRC. The Government has classified more than 108 cities as having serious water problems, and 60 as being critically short of water. The situation has been exacerbated by the pollution of raw water sources by the discharge of inadequately treated agricultural, municipal, and industrial wastewater.

1 ADB. 2001. Water for All: The Water Policy of the Asian Development Bank. Manila. 2 Data for towns are adapted from “2006 China Urban Development Report”, and for small cities from China Economic Information Network. 2 6. The enormous volume of wastewater and solid waste generated by PRC’s urban areas poses a major environmental threat to the country’s rivers, lakes, and underground aquifers. In 2006, the PRC generated about 54.0 billion cubic meters (m3) of wastewater3—about 55% from municipal sources and 45% from industrial sources. Currently, about 90% of industrial wastewater is treated before discharge to municipal sewers. Municipal wastewater is a major contributor to the pollution of the PRC’s rivers and lakes. As of 2006, only about 57% of urban wastewater was treated (compared with 34% in 2000); the rest was discharged untreated into rivers and lakes. The Ministry of Environmental Protection (MEP) maintains a network of 3,200 water quality monitoring stations nationwide. According to the 2005 State of the Environment Report,4 about 41% of the water in the seven major river basins5 does not meet the class III national water quality standard.6 Of the 50 lakes that are regularly monitored, 13 are partially polluted, 19 are seriously polluted, and only 18 meet the class III standard. Surface water sources serving municipal water supply systems are polluted to levels unacceptable under the current water quality standards.

7. The amount of solid waste generated by urban areas has also expanded rapidly. In 2006, the PRC generated 186 million tons of solid waste—an increase of 57% over the 2001 volume of 118 million tons. However, the increase in treatment capacity has not kept pace, and the capacity that has been developed is mainly for large cities. Few small cities and towns have wastewater and solid waste facilities. In addition to direct adverse impacts on public health, the growing and uncontrolled disposal of solid waste contributes to increasing contamination of groundwater supplies through inadequate leachate collection systems.

8. In the 11th FYP, the Government prioritized environmental issues, including water and air pollution, through policy reform, more investment, and better urban infrastructure management. Recognizing that adequate environmental protection and pollution controls are essential for sustainable economic growth, the Government has incorporated environmental protection as a national priority in its development strategy. In addition to enacting environmental protection laws and implementing regulations that emphasize preventive measures, the polluter pays principle, and decentralized environmental management, the Government has also undertaken numerous programs, including those for wastewater management.7 Industries were ordered to treat wastewater to meet the national wastewater discharge standards by the end of 2000; municipalities have 5-year plans to address wastewater collection, treatment, and disposal; and pollution control plans have been developed and partially implemented for the key river basins. The Government has decreed8 that, by 2010, the wastewater treatment rate in all cities of the PRC should not be lower than 60%, and that it should not be lower than 70% for the major cities9 with secondary treatment facilities. The treatment level required is dependent on the water environmental functions or quality class of the receiving water body. To achieve water quality class I, II, or III, secondary wastewater treatment would normally be required.

3 State Environmental Protection Administration. 2006. National Environmental Statistical Bulletin. PRC. Industrial wastewater made up the remaining 44.7%. 4 Annual State of the Environment Report. 2005. Ministry of Environmental Protection. PRC. 5 Changjiang (Yangtze) River, Hai River, Huai River, Huang (Yellow) River, Liao River, Songhua River, and Zhu (Pearl) River. 6 PRC water quality standards have five classes of quality covering about 40 pollution parameters. Class I is pristine, while class V is suitable only for industrial use. Class III is the minimum water quality required for municipal water supply. 7 The PRC Water Prevention and Control Law was first adopted in 1984 and amended in 1996. The law was enacted to prevent and control water pollution, protect and to improve the environment, safeguard human health, and ensure effective utilization of water resources. The law also establishes standards for water environment quality and for discharge of water pollutants and enumerates the planning, supervision, and management of the prevention and control of water pollution. 8 Ministry of Construction. 2000. Urban Wastewater Treatment and Control Technology Advice. PRC. 9 These include cities directly under the central Government, provincial capital cities and key tourist cities.

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9. The Government’s strategy focuses on: (i) developing water sources; (ii) protecting existing sources by controlling industrial and residential pollution; (iii) introducing water-efficient technologies and operations; and (iv) using appropriate pricing mechanisms to encourage conservation and generate necessary funds for operation, maintenance, and investment. The Government’s ongoing economic and enterprise reform programs require that all water supply and wastewater projects be financially sustainable and capable of cost recovery. An urban sector analysis is provided in Appendix 2.

B. Analysis of Key Problems and Opportunities

10. Key problems and opportunities include (i) a shortage of good quality drinking water, (ii) inadequate wastewater treatment capacity, (iii) inadequate SWM facilities and services, and (iv) making water supply and wastewater treatment self-financing through tariff reforms. The proposed Project covers five counties and six cities in Heilongjiang Province;10 and seven counties, seven cities and one special administrative district in Jilin Province.11 A brief profile of each county and city is given in Supplementary Appendix A.

11. Songhua River Basin (SRB). The SRB is the third largest river basin in the PRC after the Yangtze and Yellow rivers. It has an area of 557,000 square kilometers (km2) and a population of 62 million. The SRB contains major cities, including Changchun and Harbin, and the PRC’s largest oil fields. Agriculture is well developed and there is a large industrial base. The Songhua River catchment covers portions of three provinces and one autonomous region– Heilongjiang, Jilin and Liaoning provinces and Inner Mongolia Autonomous Region (IMAR). About 48.4% of the catchment is located in Heilongjiang province (covering 59.4% of the provincial territory), 24.1% in Jilin province (71.6% of the provincial territory), 27.4% in IMAR (12.9% of the autonomous region’s territory) and 0.1% in Liaoning province (0.36% of the provincial territory). The Songhua River has two headwaters; in the west, the Nenjiang River originates from Yilehuli Mountain of the Greater Hinggan mountain range; and in the south, the Second Songhua River originates from the Heavenly Lake on top of the Changbaishan Mountain. The two rivers converge at Sanchakou (border of Heilongjiang and Jiin provinces) to form the Songhua river which joins the Heilongjiang River, enters the Russian Federation, and eventually discharges to the sea.

12. The SRB is seriously polluted and is acknowledged by the MEP to be one of the four most polluted river basins in the PRC. Water pollution in the SRB, especially in relation to the protection of drinking water resources for the municipality of Harbin, has received increased national and international attention following a widely publicized pollution incident in the SRB in November and December 2005. The Songhua River is contaminated with a number of known and suspected trace organic chemicals, metals, and conventional pollutants. It is classified by the Government as class IV in some sections of the Songhua River (and even falls below class V during the 6-month low-flow winter season), and is considered unsuitable for municipal domestic water use. In March 2003, ADB approved the Harbin Water Supply Project ($100 million)12 to address the needs of Harbin City, with a population of 3 million, for clean and reliable drinking water from an alternative water source (Lalin River), since the existing source

10 The five counties are: Fangzheng, Nenjiang, Tangyuan, Tonghe, and Yanshou. The six cities are Fujin, Harbin, Jiamusi, Qitaihe, Qiqihar, and Shuangyashan. 11 The seven counties are: Fusong, Fuyu, Huinan, Jingyu, Liuhe, Tonghua and Tongyu. The seven cities are Da’an, Dehui, Gongzhuling, Huadian, Jiaohe, Meihekou, and Yushu. The special administrative district is the Changbai Mountain Administrative District. 12 ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Harbin Water Supply Project. Manila. The project districts are receiving the new high quality of water.

4 from the Songhua River was highly polluted. Because of the deteriorating water quality in the Songhua River, the Harbin Municipal Government expedited construction of the Harbin Water Supply Project, which was completed 1 year ahead of the original schedule.

13. The Government is focusing more attention on improving the SRB water quality during the current and the next two FYPs. The PRC top leadership has expressed strong support for pollution reduction and water quality improvement in the SRB, and the overall target is to ensure water quality in the SRB meets the PRC class III water quality standards by 2020. The upgrading of the State Environmental Protection Administration (SEPA), which led the preparation of the SRB Water Pollution Prevention and Control Master Plan (SRBPCMP), into the MEP will further strengthen that effort. With support from the National Development and Reform Commission (NDRC), the MEP will take the lead while each of the provinces will implement their respective shares of the SRBPCMP.

14. Project Rationale. During the processing of the Harbin Water Supply Project, ADB held extensive discussions with the Government on addressing pollution control in the SRB. Consequently, in 2002 ADB provided technical assistance (TA) for water quality and pollution control management in the Songhua River Basin.13

15. The TA, which was highly successful,14 had the following impacts. First, it developed a long-term vision for the SRB, consisting of a strategic plan identifying water quality objectives, targets and reforms and strengthening of the existing river basin and pollution control management practices, and proposed a long-term physical investment program. Second, it strengthened the capacity of key organizations responsible for pollution control and management at both the river basin and regional level, and prepared a road map outlining the key milestones leading to the development of a river basin management framework within the PRC. Third, it identified knowledge gaps relating particularly to nonpoint sources of pollution, water quality assessment (notably micropollutants), and water quality inventories. Fourth, it developed an overall strategic plan for the SRB, both refining and prioritizing existing strategic plans developed by different institutions at different levels (river basin and provincial level). The strategic plan includes the identification of an investment plan to be implemented over 15 years. Fifth, it (i) assisted the Government to develop a long-term water pollution control plan for the SRB beyond 2010, and (ii) provided strategic policy inputs to the 11th FYP and the SRBPCMP. The SRBPCMP (2006–2010), approved by the State Council on 29 March 2006, is an action program to set pollution control targets from 2006 to 2010, requiring that urban environmental pollution and ecological damage be controlled by 2010. Untreated wastewater is a major problem in the SRB and the SRBPCMP specifies that the wastewater treatment rate in large and medium-sized cities should not be less than 70% by 2010. The significant increase in the wastewater treatment capacity under the proposed Project would contribute to the target of improving the water quality in the SRB, from the current class IV and V to class III by 2020.

16. The Jilin Water Supply and Sewerage Development (JWSSD) Project ($100 million),15 approved in 2005, was the first major ADB investment directly addressing pollution control in SRB. The Jilin Urban Environmental Improvement (JUEI) Project ($100 million),16 approved in 2007 was the second, and it follows the priority list of SRBPCMP. The proposed Project, with an indicative ADB loan of $200 million, will be the third major ADB investment in the SRB, and

13 ADB. 2002. Technical Assistance to the People’s Republic of China for Songhua River Water Quality and Pollution Control Management. Manila. 14 ADB. 2006. Technical Assistance Completion Report Songhua River Basin Water Quality and Pollution Control Management. Manila. 15 As of 3 September 2008, cumulative contract awards and disbursements amount to $68.71 million and $34.14 million, respectively. 16 The loan was signed on 26 February 2008 and was effective on 20 June 2008.

5 follows the priority list of SRBPCMP. This comprehensive strategic approach to addressing pollution control in the SRB will serve as a model for demonstration and replication elsewhere in the PRC. The proposed Project will help the concerned counties and cities in Heilongjiang province to achieve a wastewater treatment rate of 70% by 2012. It will also help the project counties and cities in Jilin to achieve a wastewater treatment rate of 90% by 2012. Key areas for replication include, (i) the approach to studying the complex issues of SRB water quality and pollution control management; (ii) the river basin approach to managing water quality; (iii) the strategic pollution control action plan, which combines technical assessment, identifying investments on a prioritized basis, and institutional planning; and (iv) prioritized investments and related capacity building.

17. The underdeveloped wastewater collection and wastewater treatment in the project counties and cities leads to the discharge of untreated wastewater into local rivers, and eventually to the pollution of the SRB. Water quality in some sections of the Songhua River and its tributaries does not meet class V of the PRC surface water quality standard. The lack of adequate wastewater management degrades local rivers, poses a threat to public health, and adversely affects the quality of life in the project counties and cities. There is an urgent need to expand the sewer network and wastewater treatment capacity in project counties and cities. Heilongjiang has identified 13 subprojects, focusing on water supply and wastewater treatment. Jilin has identified 20 subprojects, focusing on wastewater treatment, solid waste management, and river improvement. Sector and project lending were thoroughly discussed and considered as alternative approaches.17 The Government expressed a strong preference for the project lending approach because all subprojects have been identified and the feasibility study reports have been completed, and there was an urgent need to implement the subprojects in accordance with the SRBPCMP. All subprojects have one common impact, which is to improve the urban environment and enhance the quality of life in project counties and cities, and they will all contribute significantly to pollution control in the SRB.

18. The project counties and cities in Heilongjiang Province18 rely primarily on surface water for their water supply. Under normal conditions, water demand is expected to exhaust developed capacity in the project counties and cities by 2010. These counties and cities experienced supply problems during a severe episode of drought in 2004 leading to dangerously low water levels in the reservoirs and loss of effective treatment plant capacity. They also experienced low pressure and supply interruptions.

19. The project counties and cities in Jilin province have domestic SWM featuring domestic waste pick-up, extensive informal recovery of recyclables, and disposal in a managed landfill. Given that their existing landfill sites will be fully utilized within 2 years, timely construction of new domestic solid waste treatment facilities is urgently needed. The inadequate solid waste management capacity causes nonpoint source pollution which contaminates the ground drinking water supplies.

20. The Project is consistent with ADB’s strategic objectives in the PRC to make markets work more efficiently through infrastructure development and to promote environmental sustainability.

21. Policy Dialogue. The Project builds on and furthers ADB policy dialogue with the Government in several key areas including: (i) cost recovery and tariff reform, (ii) wastewater management, (iii) upstream and basin-wide pollution prevention and control, (iv) water conservation, (v) corporate governance and enterprise reform, and (vi) private sector

17 During a mission to Beijing in January 2007, detailed discussions were undertaken with the Government on the MFF, sector, and project lending modalities for the proposed Project. 18 It includes Fujin City, Tangyuan County, Tonghe County, and Yanshou County.

6 participation. The cost recovery regulations are stipulated in the national guidelines on water supply, wastewater treatment, and solid waste management. ADB has supported the water tariff reform process through two water tariff TA projects19 with the Ministry of Construction under which the market-oriented National Guidelines on Water Tariffs (NGWT) were developed, promulgated, and implemented. The water tariff TA projects (i) strengthened the financial sustainability of municipal water supply companies; (ii) piloted implementation of the national guidelines in the selected case study cities of , , and Zhangjiakou; and (iii) recommended financial regulations for water supply companies and designed nationwide training programs. The NGWT requires water supply companies to adopt full cost recovery as their main objective when they set water tariffs. The full cost recovery formula for water tariffs also includes a return on equity to attract private investors. The NGWT is being implemented nationwide. In 2002, ADB provided a TA project on Preparing the National Guidelines for Urban Wastewater Tariffs and Management Study.20 The TA was completed in 2003 and assisted the Government to refine the wastewater tariff principles, develop national guidelines for wastewater tariffs, and improve urban wastewater management. In 2000, ADB approved a TA project on strengthening urban SWM.21 Completed in 2003, the TA assisted the Government to develop a national policy framework and plans for urban SWM, refine the National Guidelines on Solid Waste Tariffs, and conduct related capacity building. It established a strong foundation for the formulation of the national urban wastewater tariff guidelines for large and medium cities in the PRC. ADB is also supporting the Government to develop national policy frameworks for wastewater and solid waste tariffs, including tariff calculation methodologies focusing on small cities and towns.22 All the project county and city governments have firm plans to increase water tariffs on an average basis from CNY2.50/m3 to CNY2.80/m3 and wastewater tariffs from CNY 0.50/m3 to CNY0.80/m3 by 2009. This indicates the support for tariff reform in the project counties and cities.23 The policy dialogue is in Supplementary Appendix B.

22. Increases in the tariff for water supply and wastewater treatment under the Project are important for full cost recovery, which is needed to attract private sector participation. An assurance requires the project counties and cities to ensure that water and wastewater tariffs be set at a level that ensures full cost recovery of operation and maintenance (O&M), depreciation, and financial costs, including debt service obligations and a reasonable profit margin for water and wastewater treatment during the project operational phase. This will also ensure the financial sustainability of the Project.

23. ADB has also provided TA support to the Government on the use of market-based instruments to enhance private sector partnership in public utilities, mainly for water supply, wastewater, and SWM.24 This TA analysed the issues in the context of international best practices and how these could be adopted in the PRC. The PRC resident mission and the Private Sector Operations Department (PSOD) conducted a seminar in Beijing on 25 July 2007 on ADB’s nonsovereign lending for the provinces of Heilongjiang and Jilin. ADB is also conducting a study on nonsovereign lending in urban infrastructure development in the PRC.25 The proposed Project will create the environment necessary for eventual private sector participation by pursuing tariff reform, full cost recovery, enterprise reform, and improved

19 ADB. 1997. Technical Assistance to the People’s Republic of China for the Water Supply Tariff Study; Manila; and ADB. 1999. Technical Assistance to the People’s Republic of China for the Water Tariff Study II. Manila. 20 ADB. 2001. Technical Assistance to the People’s Republic of China for Preparing the National Guidelines for Urban Wastewater Tariffs and Management Study. Manila. 21 ADB. 2000. Technical Assistance to the People’s Republic of China for Strengthening Urban Solid Waste Management. Manila. 22 ADB. 2007. Technical Assistance to the People’s Republic of China on Urban Wastewater and Solidwaste Management for Small Cities and Towns. Manila. 23 Following 2008 water and wastewater tariff increases, further increases are expected by 2012. 24 ADB. 2003. Technical Assistance to the People’s Republic of China for Policy Reform Support. Manila. 25 ADB. 2007. Technical Assistance for Sustainable Urban Development in Asia. Manila.

7 governance; all are prerequisites for private sector involvement. Other types of private sector participation, including leasing contracts and joint ventures, were also reviewed. Tariff reforms and increases would make the IAs financially sustainable, and enable them to generate funds for future water and wastewater expansion projects. Consequently, tariff reforms and capacity building under the Project would contribute to improved governance.

24. External Assistance. Since 1992, ADB has provided 26 loans totalling $2,904 million to the PRC for urban development and environment projects (Appendix 3). ADB has also provided about $52.7 million for more than 75 TA studies to prepare these projects, and to review and study key issues in water resources, urban water supply, wastewater treatment, and pollution control and heating. External assistance to Heilongjiang province and Jilin province has principally been provided by ADB and the World Bank.

25. Lessons Learned. ADB’s water supply loan projects in the PRC have generally been implemented well.26 The lessons identified from evaluation of water supply and sanitation projects highlight the importance of integrating both supply and demand concerns into project design. Encouraging broad reforms, such as commercial management, and introducing competition will promote efficient and responsive delivery of water supply and wastewater services. Appropriate pricing policies for water and sanitation services are also required. Other lessons include the need to (i) review technical designs thoroughly; (ii) consider local conditions and constraints; (iii) support financial reform, particularly in establishing autonomous wastewater entities and tariff increases to ensure sustainability; (iv) strengthen institutions, particularly by giving them managerial autonomy; (v) educate the public in environmental improvement; (vi) consult the public and involve the community; (vii) address resettlement issues early; and (viii) support public–private partnerships in water supply and wastewater treatment. For example, the PPTA consultants worked closely with the local design institutes to review the demand and supply side analysis for each subproject, through the use of historical and national baseline data and technical design standards. This resulted in adjustments in the selection of technologies and equipment, optimization of the engineering designs which has led to reductions in land acquisition and resettlement costs. Full cost recovery through a phased approach was assessed in detail and this was discussed and agreed with the EAs and IAs. Training and institutional strengthening measures have been incorporated into the project design including, among others, public education activities on environmental health and sanitation.

26. A recently completed portfolio performance review of the water supply, sanitation, and waste management sector identified successes and deficiencies. It also acknowledged lessons from portfolio performance27 and the PRC country assistance program evaluation. Among the major issues identified were (i) delays in the start-up of projects and in procurement, (ii) weak institutional arrangements for project implementation and sustainable operations, and (iii) a low proportion of civil works financing, resulting in loan savings and cancellation of surplus loan amounts. During project processing, lessons were taken into consideration by (i) thoroughly evaluating the technical designs and technologies; (ii) ensuring an adequate debt–equity ratio for the project IAs; (iii) undertaking rigorous sensitivity analysis of cash flows, and financial and economic analysis; and (iv) incorporating institutional strengthening measures to improve the level of corporate governance to complement the capacity development components included in the Harbin Water Supply, JWSSD and JUEI projects. The proposed Project addresses three

26 In the project completion reports, the Dalian Water Supply Project was rated “generally successful”; and the Anhui Environmental Improvement Project, Fuzhou Water Supply and Wastewater Treatment Project, and Creek Rehabilitation Project were all rated “highly successful”. The project performance audit report for the Dalian Water Supply Project rated it “highly successful”. 27 ADB. 2005. PRC: Water Supply, Sanitation and Waste Management Portfolio Performance Review. Final Report. Manila.

8 issues indicated in the 2007 PRC country assistance program evaluation:28 (i) avoiding one-off project interventions, (ii) the need for a more integrated approach to addressing pollution, and (iii) the use of different kinds of lending instruments.

III. THE PROPOSED PROJECT

A Impact and Outcome

27. The Project will enhance the urban environment and improve public health and the quality of life for urban residents in the project cities and counties in the provinces of Heilongjiang and Jilin. This will be achieved by increasing wastewater treatment coverage, enhancing SWM, and improving the supply of potable water. The outcome of the Project will be reduced pollution and improved water supply, wastewater management, and SWM in the SRB.

B. Outputs

28. The components include better water supply and wastewater services in Heilongjiang province; improved wastewater facilities, SWM, and river improvement in Jilin province; and institutional capacity building for efficient project implementation and management for both provinces. The Project has three components, broken down into five subcomponents (outputs) and 20 activities as indicated in the design and monitoring framework. These will contribute to and support the 11th FYPs of the provincial governments in Heilongjiang and Jilin and the SRB Water Pollution Prevention and Control Master Plan (SRBPCMP) by (i) reducing pollutant loading to the SRB through direct collection and treatment of wastewater (point sources) and municipal solid wastes (nonpoint sources) in the project counties and cities; (ii) addressing the water shortage problem through effluent reuse; (iii) providing a supply of reliable and high- quality potable water in four counties and cities of Heilongjiang province; (iv) reducing both point and nonpoint sources of pollution in the Changbaishan Administrative District; (v) reducing the incidence of waterborne diseases; (vi) increasing the efficiency and management capacity of the IAs; (vii) integrating approaches for basin-wide pollution prevention and control; and (viii) improving cost recovery through a better tariff structure, with gradual increases to achieve full cost recovery. A detailed description of project components is in Appendix 4.

29. Component I. The Heilongjiang component has two subcomponents: (i) water supply and (ii) wastewater treatment. The first subcomponent includes the construction of four water treatment plants (WTPs) with a cumulative capacity of 49,500 m3/day and 120 kilometers (km) of water transmission pipelines. The second includes the construction of nine wastewater treatment plants (WWTPs) with a total treatment capacity of 381,000 m3/day and 199 km of sewer pipelines.

30. Component II. The Jilin component has three subcomponents: (i) wastewater treatment, (ii) SWM, and (iii) river improvement. The first subcomponent includes the construction of nine WWTPs with a total capacity of 178,000 m3/day and 368 km of sewer pipelines. The second subcomponent includes the construction of 10 sanitary landfill facilities with a total capacity of 2,400 tons per day with service life ranging from 13 to 22 years. The third subcomponent includes river improvement at the source of the Songhua River including (i) two WWTPs with total capacity of 3,100 m3/day, (ii) three solid waste transfer stations with a total capacity of 40 tons per day, and (iii) 3.8 km of sewer pipelines.

31. Component III. This Component provides for institutional capacity development for effective project management including (i) providing training to strengthen organizational

28 ADB. 2007. PRC Country Assistance Program Evaluation. Manila.

9 structures and staff resources to implement, operate, and maintain the project components; (ii) strengthening management practices in human resources, finance, and corporate planning; and (iii) providing support for the Government’s public awareness program to ensure the sustainability of project benefits.

C. Special Features

32. Integrated River Basin Management. The proposed Project is an integral part of the basin-wide Songhua water resources management initiative, and the SRBPCMP. It will complement the ongoing JWSSD Project and the JUIE Project to address pollution control in the SRB. The water quality improvements will contribute to integrated water resource management and pollution control, a basin-wide management program, and transboundary pollution prevention and control. The proposed Project reflects a continuation of ADB’s effort to improve the environment of the SRB following the JWSSD Project and the JUEI Project. Lessons learned from the JWSDD Project and the JUEI Project regarding the integration of wastewater treatment, water reuse, and water resource protection are continued and improved under the proposed Project. The Project focuses on strengthening the environmental management institutions and the policy dialogue on integrated river basin management and pollution control in the SRB, resulting in improved environmental performance.

33. Public–Private Participation. The proposed Project is catalyzing additional public and private sector investments in reducing pollution in the SRB. The ADB East Asia Department (EARD) and PSOD are adopting a public–private partnership approach to address the large wastewater treatment funding needs for Heilongjiang province. PSOD is preparing a project29 for the Tsinghua Tongfang Water Engineering Company Limited (TTWE), a private firm, which is currently managing the largest WTP in Harbin. The PSOD project will provide an equity injection and credit lines30 to the TTWE to undertake the management of WTPs and WWTPs in other cities in Heilongjiang. TTWE is the borrower and the sponsor is the Tsinghua Tongfang Company Limited, a publicly listed company, which is an integrated solution provider in the technology and environmental protection sector. TTWE is focusing on the water and wastewater sector business and is exploring private–public participation opportunities with local governments. TTWE, with an equity investment of $3.4 million, is a minority shareholder in the Qitaihe City Central WWTP and an effluent reuse subproject included in the proposed Project. For this subproject, the ADB loan will be used along with the local government counterpart funds and private funds. The TTWE investment would (i) solve the funding shortage problem at Qitaihe, and (ii) improve the management and operational efficiency at Qitaihe through training provided by TTWE. This pilot demonstration subproject could be replicated in other subprojects in Heilongjiang, and then in Jilin province. TTWE has firm plans to invest in six other cities in Heilongjiang province. Further, two other foreign companies are actively involved in joint venture investments in wastewater treatment in Heilongjiang province.

34. Tariff Reform. Some of the project counties and cities have committed to generate funds to finance the water and wastewater subcomponent of the Project from water and wastewater tariff increases amounting to $3.5 million. 31

29 Proposed Songhua River Basin Water Pollution Control and Management Project Private Sector Facility. Management approved the concept paper on 17 October 2008. 30 At the concept clearance stage, this tentatively includes (i) equity investment, the lower of $12 million and 20% of the equity capital in TTWE; (ii) direct loans up to $35 million, in USD or CNY subject to ADB’s funding availability, with a tenure of up to 12 years; and (iii) B-loan up to $100 million through the complementary financing scheme of ADB in USD. Exact amounts and detailed terms of the equity investment, direct loans, and B-loans will be firmed up during the due diligence and negotiations. 31 The cities include Jiamusi in Heilongjiang ($1.24 million), Dehui ($0.75 million), Fuyu ($0.93 million), and Liuhe ($0.54 million) in Jilin Province.

10 35. Catalytic Impact. The policy dialogue on pollution control in the SRB that started with the preparation of the Harbin Water Supply Project and the cumulative efforts up to the proposed Project have had a large catalytic impact on mobilizing resources to reduce pollution in the SRB. The proposed Project is catalyzing both additional government and private investments to reduce pollution in the SRB.

D. Project Investment Plan

36. The project investment is estimated at $396.3 million equivalent, including taxes and duties. The cost estimates are summarized in Table 1 and detailed in Appendix 5, and Supplementary Appendix C.

Table 1: Project Investment Plan ($ million) Component Total Cost e A. Base Costs a 1. Heilongjiang Component a. Water Supply 19.4 b. Wastewater Treatment 132.5

2. Jilin Component a. Wastewater Treatment 74.7 b. Solid Waste Management 73.9 c. Integrated River Improvement 7.8

3. Project Management, Training, Consulting Services 2.7 Subtotal 311.0 B. Contingencies 1. Physical b 24.5 2. Price c 35.9 Subtotal 60.4 C. Financing Charges during Implementation d 24.9

Total 396.3 a In May 2008 prices, including taxes and duties. b Computed at 8% for all civil works, equipment, training, and consulting services. c Computed, based on foreign exchange inflation rate of 6.8% in 2008, 0.7% in 2009, 1.4% in 2010, 0.4% in 2011, 0.5% in 2012 and onwards; and local currency inflation rate at 5.5% in 2008, 5.0% in 2009 and onwards; and includes provision for exchange rate fluctuation under assumption of a purchasing power parity exchange rate. d Includes interest and commitment charges for both the Asian Development Bank (ADB) loans and domestic bank loans. Interest during construction for the ADB loan has been computed at the 5-year forward London-interbank offered rate (LIBOR) of 3.68% plus a spread of 0.2%. e Includes taxes and duties of $11.06 million. Source: ADB estimates.

E. Financing Plan

37. The Government has requested a loan of $200 million from ADB’s ordinary capital resources to help finance the Project, out of which $100 million is for Heilongjiang province and $100 million is for Jilin province. The loan will have a 25-year term, including a grace period of 5 years, an interest rate to be determined in accordance with ADB’s London interbank offered rate (LIBOR)–based lending facility for US dollar loans, commitment charge, and such other terms and conditions set forth in the draft Loan Agreement. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility on the basis of these terms and conditions, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB.

11

38. The ADB loan will finance 50.5% of the project cost, including the base cost and the financial charges during implementation and taxes and duties. Local costs will be financed from water and wastewater tariffs, domestic loans from PRC banks,32 capital infusion from the local government, and state bonds. HPG and JPG have confirmed the allocation of state bond funds33 to the project counties and cities. The local governments have provided commitment letters confirming their respective counterpart fund contributions to the Project. The financing plan is summarized in Table 2.

Table 2: Financing Plan Amount Source % ($ million) Asian Development Bank Loan 200.0 50.5 State bonds, Heilongjiang 46.4 11.6 Local government equity, Heilongjiang 44.6 11.3 State bonds, Jilin 19.7 5.0 Local government equity, Jilin 78.4 19.7 Tariffs 3.5 0.9 Private sector equity (Tsinghua Tongfang Company Ltd.) 3.4 0.9 Cofinancing (domestic commercial banks) 0.3 0.1

Total 396.3 100.0 Source: Asian Development Bank estimates.

39. The Borrower is the PRC. The Government of the PRC will make the loan proceeds available to the HPG and JPG on the same terms and conditions as those of the ADB loan. HPG and JPG will make the loan proceeds available to the concerned county and city governments on the same terms and conditions as those of the ADB loan; the loan proceeds will then be onlent to the IAs on the same terms and conditions. The IAs will bear the risks of foreign exchange and interest rate variation for their portion of the loan proceeds, and undertake to perform the obligations as provided in the Project Agreement applicable to the IAs. The flow of funds and the onlending arrangements are shown in Appendix 6.

F. Implementation Arrangements

1. Project Management

40. HPG is the Executing Agency (EA) for the Heilongjiang component. JPG is the EA for the Jilin component. HPG and JPG have established project leading groups (PLGs), each chaired by a vice governor. The PLG will provide overall policy guidance, facilitate interagency coordination, and resolve any institutional problems affecting project implementation. The Heilongjiang PLG consists of members from the Heilongjiang Provincial Development and Reform Commission, Heilongjiang Provincial Finance Bureau, the Heilongjiang Provincial Audit Bureau, and the Heilongjiang Environmental Protection Department. The Jilin PLG consists of the Jilin Provincial Development and Reform Commission, Jilin Provincial Finance Bureau, and Jilin Provincial Environmental Protection Department. Effective project coordination between Heilongjiang and Jilin would be ensured through (i) the SRBPCMP leading group, which is chaired by the Ministry of Environmental Protection (MEP), and consists of, among others,34 the vice governors of Heilongjiang and Jililn as members; (ii) three coordination meetings between

32 Industrial and Commercial Bank of China, and China Construction Bank. 33 State bonds issued by the central Government, which allocates these grant funds to the provinces based on priority. HPG and JPG in turn allocate the state bond grant funds to the subprojects included in the SRBPCMP. 34 Ministry of Finance, National Development and Reform Commission, Ministry of Water Resources, and Ministry of Construction.

12 the Jilin and Heilongjiang project management offices (PMOs); and (iii) ADB review missions. As they are members of the leading group for the SRBPCMP, the two vice governors will be able to ensure effective coordination between the two provinces in implementing the proposed Project. HPG and JPG have also established PMOs, each with a director and staff. The project county and city governments in Heilongjiang and Jilin have also established similar organization structures, including PMOs chaired by their vice mayors. The county and city level PMOs will maintain interdepartmental coordination and work closely with Jilin and Heilongjiang PMOs.

41. All the IAs listed in Appendix 4 are limited liability companies incorporated under PRC Company Law.35 The board of directors of each IA will oversee the financial and operational matters of each IA, including (i) hiring and firing of senior management, (ii) reviewing staffing and remuneration plans, (iii) reviewing the progress of construction and approving annual construction plans, (iv) reviewing and approving annual financial budgets, (v) reviewing the investment plans and accounts of the IAs, and (vi) approving the procurement of major equipment and civil works contracts. The IAs will increase their staff strength significantly for the construction period and when operations begin. The internal controls and accounting and auditing procedures of the IAs were reviewed through a financial management assessment (FMA) and these are generally in order. The FMA for the Heilongjiang and Jilin IAs is in Supplementary Appendix D. The IAs’ technical and institutional capacities have been assessed, and these are adequate for project implementation. The IAs will retain the services of design institutes, specialist procurement agencies, and construction supervision companies to assist in the implementation activities. The PMOs and IAs will have a number of their staff trained in project management and relevant ADB procedures during implementation of the Project. The institutional and capacity building needs for provincial, county, and city PMOs and IAs have been assessed and are described in Supplementary Appendix E.

2. Implementation Schedule

42. Based on discussions with each IA, each subproject implementation schedule has been finalized. The Project will be implemented over a period of 5 years from 2009 to 2013 although some of the subprojects are planned for earlier completion (Appendix 7). The estimated implementation period is based on the project scope, central and local government requirements, and construction technology requirements. The attached implementation schedule is considered realistic and achievable based on discussions with each IA because the project implementation structure is already in place, and the preparatory works have already started. For some subprojects, the preliminary designs are underway.

3. Procurement

43. All procurement of goods and works shall be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time).36 Contracts for goods estimated to exceed $1.0 million and contracts for works estimated to exceed $10.0 million will be procured using international competitive bidding (ICB) procedures. Contracts for goods and contracts for works estimated to cost equal or less than the above ICB values but more than $100,000 shall be procured on the basis of national competitive bidding (NCB) procedures in accordance with the PRC Tendering and Bidding Law (1999), subject to modifications agreed with ADB. Contracts for goods and works estimated to cost $100,000 or less will be procured using shopping procedures. For ICB invitations for bids, invitations for prequalification, draft prequalification documents, draft bidding documents, and prequalification and bid evaluation reports are to be submitted to ADB for prior review and approval. For NCB, the first draft English

35 PRC Company Law. 1993. 36 ADB will require the PMO to use ADB-approved standard bidding documents (to be developed as necessary to ensure high quality and consistency of the documents) that will facilitate ADB review.

13 language version of the procurement documents should be submitted for ADB review and approval regardless of the estimated contract amount. The ADB-approved procurement documents should then be used as a model for all NCB procurement financed by ADB for the Project, and need not be subjected to further review. ADB will review the bid evaluation report and award of contract on a post-review basis. For shopping, ADB will review the award of contract on a post-review basis. Procurement plan for subprojects in both provinces are being prepared and to be finalized. The summary procurement plans for the subprojects in both provinces are presented in Appendix 8, and the detailed procurement plans are in Supplementary Appendix F.

4. Advance Contracting and Retroactive Financing

44. HPG and JPG requested (i) advance contracting, which includes tendering and bid evaluation for civil works contract packages, preparation of tender documents and bid evaluation for the procurement of materials, plant, equipment, and vehicles, and recruitment of consultants; and (ii) retroactive financing (Supplementary Appendix G) of eligible expenditures up to $10 million (equivalent to 10% of the loan proceeds for Heilongjiang), and $20 million (equivalent to 20% of the loan proceeds for Jilin) incurred before loan effectiveness, but not earlier than 12 months before signing of the Loan Agreement. The issuance of invitations to bid under advance procurement action will be subject to ADB approval. All advance procurement actions will be undertaken in accordance with ADB’s Procurement Guidelines or ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time) as appropriate. Contracts proposed for retroactive financing will be undertaken in accordance with ADB’s Procurement Guidelines. The Government, HPG, JPG, and the IAs have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project.

5. Consulting Services

45. For the Heilongjiang component, the Project provides funding for an estimated 25 person-months of international and 83 person-months of national consulting services to support the Heilongjiang PMO, local governments, and IAs in project implementation management and capacity building. For the Jilin component, the Project provides funding for an estimated 20 person-months of international and 71 person-months of national consulting services to support the Jilin PMO, local governments, and IAs in project implementation management and capacity building. A consulting firm will be recruited in accordance with ADB’s Guidelines on the Use of Consultants using the quality- and cost-based selection method (80:20) and requesting full technical proposals. Consulting services are required for (i) providing design review and advisory services to ensure that the technical specifications, detailed design drawings, and implementation schedules are properly addressing all technical issues, complying with engineering norms, and are up to date; (ii) project management; (iii) establishing the project performance management system (PPMS); (iv) preparing a strategy for reducing nonrevenue water along with a time-bound action plan for water supply; (v) social, environmental, and resettlement monitoring; (vi) financial management; (vii) helping with private sector participation initiatives; (viii) providing training related to project management, procurement, and construction supervision as well as specific training on such issues as how to efficiently operate the wastewater collection and treatment facilities, the municipal solid waste (MSW) treatment facilities and the water supply treatment and distribution systems; and (ix) improving O&M. The outline terms of reference for consulting services is provided in Supplementary Appendix H.

14 6. Governance and Anticorruption Policy

46. ADB’s Anticorruption Policy (1998 and as amended to date) was explained to and discussed with HPG, JPG, local governments concerned, and the IAs. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy will be included in the loan covenants and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of HPG, JPG, concerned county and city governments, and the IAs, and all contractors, suppliers, consultants and other service providers as they relate to the Project. For the Project, HPG and JPG will undertake the following anticorruption actions: (i) involve government officials from the concerned provincial and municipal departments in bidding and construction to enhance construction quality control and supervise effective work; (ii) introduce a dual-signing system in which the civil works contract winner also signs an anticorruption contract with the employer; (iii) periodically inspect the contractor’s activities related to fund withdrawals and settlements; (iv) engage the project management consultant to support PMO and the IAs to ensure good governance, accountability, and transparency in project operations; (v) in consultation with relevant central government ministries, update rules and regulations on local and corporate governance and anticorruption and enhance transparency of the IAs’ operations; and (vi) disclose audited financial statements and project accounts and contract awards on the project websites of JPG and HPG, the local governments concerned, and the IAs.

7. Disbursement Arrangements

47. The loan proceeds for the proposed Project will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). To facilitate project implementation and funds flow, two imprest accounts will be set up upon loan effectiveness at a commercial bank acceptable to ADB. One imprest account will be managed by Heilongjiang Provincial Finance Bureau, and the other by the Jilin Provincial Finance Bureau. The initial advance to be deposited in the respective imprest accounts will not exceed either 6 months of estimated expenditures or 10% of the loan amount, whichever is lower. For the contracts of large works under the Project, direct payment procedures will apply. If the Government initially funds eligible expenditures from its own resources, the reimbursement procedures will be used. To expedite funds flow and simplify documentation process, the statement of expenditures (SOE) procedure will be used for liquidation and replenishment of imprest accounts and reimbursement of eligible expenditures not exceeding $200,000 per individual payment. The payments in excess of the SOE ceiling will be reimbursed, liquidated, or replenished based on full supporting documentation.

8. Accounting, Auditing, and Reporting

48. A loan covenant will require the IAs to submit independently audited annual financial statements and project accounts to ADB. The IAs will keep records to allow the identification of goods and services financed out of the loan proceeds, following accounting principles and practices prescribed by the PRC Accounting Law,37 which requires enterprises to prepare financial statements and generally follow internationally accepted accounting standards. The IAs will maintain separate project accounts and records. The financial statements of the project accounts and the annual corporate financial statements for IAs will be subject to external audit

37 Accounting Law of the People’s Republic of China was adopted by the Ninth Meeting of the Standing Committee of the Sixth National People’s Congress on 21 January 1985.

15 by the concerned local government Audit Bureaus, the Heilongjiang Provincial Audit Bureau, the Jilin Provincial Audit Bureau, and the State Audit Administration. The audits will be carried out in accordance with regulations for auditing approved by the State Council and will meet ADB requirements. The audit reports shall include a separate auditor’s opinion on the use of the imprest accounts and SOE. The IAs’ annual audited financial statements and audited project accounts will be submitted to ADB no later than 6 months after the end of the fiscal year for the entire implementation period. The HPG, JPG, concerned local governments, and the IAs have been informed about the ADB policy requiring the submission of audited financial statements on time.

49. HPG, JPG, and the IAs will submit reports and information to ADB concerning the use of the loan proceeds, project implementation, and IA performance. The Heilongjiang and Jilin PMOs will prepare and submit semiannual progress reports indicating (i) progress in project activities, (ii) problems encountered and action taken during the period under review, (iii) the proposed program of activities, and (iv) progress expected in the next half year. A project completion report shall be prepared and submitted to ADB not later than 3 months after the completion of the project facilities.

9. Project Performance Monitoring and Evaluation

50. The initial PPMS indicators, their relevance, and monitoring practicalities were discussed with the PMOs and IAs during project preparation, including (i) SRB pollution reduction;38 (ii) service levels; (iii) nonrevenue water, water conservation, and treated water quality; (iv) treated wastewater quality and other operational performance measures; (v) percentage of wastewater collected and treated; (vi) solid waste collection, transportation and treatment efficiency; (vii) public satisfaction with the urban environment; (viii) economic data to monitor project impacts on improved living conditions and economic opportunities; (ix) health and gender data; (x) incidence of water-, vector-, and airborne diseases; and (xi) increase in public awareness of environmental protection.

51. At the beginning of the Project, the Heilongjiang and Jilin PMOs and the IAs, with the assistance of consultants,39 will develop comprehensive PPMS procedures to generate systematic data on the inputs and outputs of the subprojects, as well as the indicators noted above to measure project impact. The PMOs and IAs will (i) refine the PPMS framework, (ii) confirm achievable goals, (iii) firm up monitoring and recording arrangements, and (iv) establish systems and procedures no later than 6 months after loan effectiveness. Under the PPMS framework, baseline and progress data will be reported at regular time intervals by the PMOs and the IAs, including semiannual reporting of the environmental management plan. The PMOs and IAs will be responsible for analyzing and consolidating the data through their management information system, established at the time of loan implementation. The PPMS will be designed to permit adequate flexibility to adopt remedial action regarding project design, schedules, activities, and development impacts. The PMOs and IAs, with the assistance of the consultants, will monitor and assess activities, and report to ADB twice a year on the physical implementation and financial aspects of the Project from commencement until 2 years after project completion, to ensure that impacts are monitored and reported in line with ADB requirements.

38 The loan consultants will further review and indicate 3–4 specific indicators, e. g., chemical oxygen demand and biological oxygen demand. 39 The Jilin and Heilongjiang PMOs with the assistance of the consultants will review and incorporate as appropriate the monitoring indicators for environmental protection and pollution control developed by MEP for the SRB.

16 10. Project Review

52. ADB and the Government will jointly review project implementation at least twice a year. In addition, ADB and the Government will undertake a comprehensive midterm review 2 years after the start of project implementation. This will include a detailed review of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity-building measures. Feedback from the PPMS activities will be analyzed.

IV. PROJECT BENEFITS, IMPACTS, AND RISKS

A. Project Impacts and Benefits

53. The Project will directly benefit about 9.94 million urban residents in the project counties and cities in Heilongjiang province and Jilin province, whose living conditions and public health standards will be improved by (i) improved quality of water supply and wastewater services and solid waste management and a reduction in nonpoint source pollution through increased SWM capacity; (ii) reduced incidence of waterborne diseases to below 2007 levels (to be monitored through the PPMS); and (iii) saved water through water reuse and a reduction in unaccounted for water.

54. The Project will result in improved management and utilization of water resources, and a reduction in pollution in the SRB, bringing positive and transjurisdictional benefits in the provinces of Heilongjiang and Jilin. The water quality improvements in the SRB will also contribute to integrated water resource management and pollution control, a basin-wide management program, and transboundary pollution prevention and control. The Project will secure the provision of a clean and reliable water supply to the project counties and cities in Heilongjiang Province by developing new drinking water sources. The proposed extension, replacement, and rehabilitation of water distribution systems will increase the proportion of the population with access to piped water supplies. These improvements in the distribution system will reduce water losses and reduce the risk of contamination of treated water within the distribution system. Recycling wastewater will reduce water pollution and address water shortages.

B. Social Dimensions

1. Land Acquisition and Resettlement

55. Resettlement impacts have been identified and resettlement plans have been prepared in accordance with PRC laws and regulations governing land acquisition and resettlement and ADB’s Involuntary Resettlement Policy. The land acquisition and resettlement program is designed to ensure that affected persons will be better off (or at least not worse off) as a result of the Project. Overall, the land acquisition and resettlement impact of the Project will be significant. A total of three full resettlement plans and 18 short resettlement plans with three due diligence reports, and six statements of land acquisition and resettlement40 have been prepared by the IAs with the assistance of the local design institute. The 33 subprojects in Heilongjiang and Jilin province will require the permanent acquisition of 272.6 hectares (ha) of land, temporary acquisition of 125.5 ha, and dismantling of 11,180.64 m2 of residential and non- residential structures. In total, 287 households with 1,523 persons will be permanently affected by land acquisition, 331 households with 1,067 persons by temporary land occupation, and 68 households with 238 persons by residential and nonresidential house demolition.

40 Statements here refer to the subcomponents that involve state-owned land to be acquired. This does not affect village committee and farmer households.

17 56. The total cost of land acquisition and resettlement is estimated to be CNY238.1 million ($34.0 million).41 Of the total resettlement costs, CNY46.0 million ($6.6 million) is for Heilongjiang province and CNY192.1 million ($27.4 million) is for Jilin province. The measures for economic rehabilitation include: (i) provision of job opportunities to the affected persons during the project construction and operational phases, (ii) provision of basic social insurance to affected persons whose land is newly acquired, (iii) development of crops with higher economic value, (iv) promotion and development of new enterprises and self-employed secondary and tertiary businesses, and (v) provision of technical training to the affected persons to increase their skills. The PMOs and IAs will supervise implementation to ensure that vulnerable persons receive adequate compensation, housing arrangements, access to the special fund and the minimum living guarantee, and assistance to restore their living conditions and incomes.

57. The summary resettlement plan is in Appendix 9. HPG, JPG, the project county and city governments, and the IAs have implemented ADB’s Public Communications Policy (2005), which requires full disclosure of the resettlement activities, by (i) distributing copies of the resettlement information booklet to affected households and village offices on 10 July 2008, (ii) posting the resettlement plans in village offices or resident committees on 15 July 2008, and (iii) posting English versions of the resettlement plans on the ADB website following their endorsement by the project county and city governments, HPG, JPG, and the ADB Environment and Social Safeguard Division on 28 July 2008.

58. ADB requires both internal and external resettlement monitoring and evaluation of the affected persons during implementation. The IAs will report progress regularly to the PMO, which in turn will summarize the land acquisition and resettlement progress in quarterly progress reports to ADB. The PMO will also engage an independent monitor who will visit the subprojects every 6 months to (i) review resettlement progress and the general welfare of those affected, (ii) make recommendations to resolve any issues or problems, and (iii) provide advice to IAs and local officials. The monitor will pay special attention to vulnerable groups, including women and the poor, to assess whether they have fully regained their standard of living. Monitoring and evaluation reports will be prepared every 6 months during implementation and annually for 2 years after the completion of resettlement. These reports will be submitted simultaneously to ADB, PMOs, and the IAs, and will be uploaded onto the ADB website.

2. Poverty Reduction and Social Benefits

59. Poverty and social analysis was undertaken in line with ADB guidelines to collect detailed social information to inform project design and implementation. The analysis was also used to identify poverty reduction and social development objectives, outcomes, and indicators. In addition to the socioeconomic survey, public consultations were conducted with consumer groups, business communities, government agencies, people affected by the Project, and civil society organizations. A participatory approach was adopted for project design and will continue during project implementation. The poverty and social analysis identified vulnerable groups and opportunities for pro-poor interventions and social action measures, and outlined the participation and mitigation plans to help achieve positive social benefits. The Summary Poverty Reduction and Social Strategy has been prepared and is provided in Appendix 10. The social and poverty impact assessment is in Supplementary Appendix I.

60. The Project will directly benefit an urban population of 9.94 million including 7.04 million in Heilongjiang province and 2.9 million in Jilin province. Of the total direct beneficiary population, about 6.85% (4.62% of the beneficiaries in Heilongjiang Province, and 12.24% of those in Jilin Province) are classified as poor based on the weighted average local urban

41 The base resettlement costs excluding contingencies are estimated at CNY150.6 million ($21.52 million).

18 poverty line of CNY2,196 per year. Ethnic minorities are scattered across the project counties and cities and represent 4.1% of the population. The social analysis determined that they are socially and economically integrated with the majority population and will not be subject to any adverse impacts of the project as a result of the their minority status.

61. The Project will lead to: (i) a better urban environment, including more sanitation, pollution control, provision of clean water, and a reduction in wastewater and solid waste pollution in the project counties and cities; (ii) temporary jobs during the construction phase and permanent jobs during the operational phase; (iii) a reduction in the incidence of water- and vector-related diseases, with an associated reduction in medical costs, and in the number of workdays and school days lost; (iv) more environmental awareness; (v) fewer risks of pollution to downstream water users; (vi) value-added benefits from local procurement; and (vii) better investment conditions to stimulate the local economy to create new and to accelerate the rehabilitation of the ecological system of the project counties and cities. The health impact analysis is in Supplementary Appendix J.

62. The Project will create 6,620 person-years of direct short-term employment with earnings totalling CNY89.1 million per year during the project construction phase, and 1,380 person-years of direct long-term employment with wages totalling CNY18.4 million per year during the project operation phase. About 30% of the short-term employment opportunities, including the jobs of manual labourers for excavation, material handling, vehicle operation, and food provision, will be filled by the poor, women and minorities, earning CNY26.7 million during the project construction phase.

63. To ensure that vulnerable groups will gain maximum benefits from the Project, (i) priority will be given to the vulnerable groups for the employment and training opportunities generated from the project construction and operation phases; (ii) the selected contractors will be sensitized to the need to provide maximum benefits to the vulnerable; and (iii) the contractors will be required to adopt pro-active measures, such as quota systems and training programs for the vulnerable group (e.g., the contracts of the contractors will specify that at least 15% of total jobs and training opportunities will be provided to women and 15% to the poor and members of minorities).

64. Based on the health data provided by the respective local health bureaus and the results of the health impact analysis, it is estimated that the annual health cost savings in 2007 directly from the urban environmental improvement in the project area of SRB totals CNY509.3 million, and the net present value (NPV) of health benefits during from the period 2011–2032 is about CNY908.1 million. The result is consistent with WHO reports supporting the conclusion that improving water supply and sanitation can have a significant impact on human health. However, for the full health benefits to be realized, close coordination will be carried out by each IA with the existing public environmental awareness and hygiene education program of the environmental protection and health bureaus. During project implementation, a social development specialist will be recruited to document and monitor the intensity of activities under the public awareness programs.

65. The affordability of water and wastewater services for the poor has been assessed based on the proposed tariffs and household income statistical data. These indicate that average households and households in the lower income class will find the tariff increase affordable, since it will represent a small percentage of their total income. The impact on households in the lowest income bracket may be significant, but it will be mitigated through the existing tariff reduction and subsidy program. These subsidies are in addition to the minimum living guarantee.

19 66. A participatory process has been used throughout the project preparation and this will continue during project implementation, monitoring and evaluation. A number of key indicators will be used to monitor the poverty and social aspects of the Project.

C. Financial Aspects

67. A financial evaluation of the Project was undertaken in real terms using constant 2008 prices. The project cost estimates and financial projections in nominal terms were converted to real terms by adjusting for the projected effects of foreign and domestic inflation and currency fluctuation. Incremental benefits and costs were derived by evaluating the financial position of the IAs under with-project and without-project scenarios. The financial internal rate of return (FIRR) for the Project was computed on an after-tax basis of 7.6% for the water supply subprojects, and 6.7% for the wastewater subprojects, which compares favorably with the weighted average cost of capital in real terms of 2.8%. The financial analysis is in Appendix 11, and the detailed financial analysis and financial projections is in Supplementary Appendix K. The sensitivity analysis includes examination of the risk that (i) project costs will increase by 10%, (ii) O&M costs will increase by 10%, and (iii) project implementation and subsequent realization of benefits will be delayed by a year. An affordability analysis was undertaken based on proposed tariffs and household income data from the social survey. Detailed verification of the local financing plan indicates that the equity contributions are on average about 5% of annual revenues from the concerned county and city governments, indicating minimal risk. The county and city governments have sufficient financial resources to take on responsibility for guaranteeing the loan repayments, and have provided assurances that they accept this risk. Tariffs under the Project are considered affordable if the combined average water and wastewater charges are less than 5% of monthly household income. The estimated tariffs on this basis are affordable to the average household (for whom they represent 3.0% of monthly income), and to the poorest 10% of households (for whom they represent less than 4% of monthly income before accounting for poverty reduction measures that exist now or that have been committed to).

68. The IAs agreed to minimum levels of financial performance, and these will be included as loan covenants covering capital structure (debt–equity), debt service cover, and liquidity. Financial projections estimate the tariffs required for an appropriate level of financial performance. Periodic tariff reviews will be required to overcome the risk of poor financial performance or of unexpected changes in tariff income. The financial sustainability of the Project was verified through a financial analysis of the IAs. Generally, the current levels of tariffs for water supply and wastewater treatment in the provinces are sufficient to cover the costs of basic operation and maintenance. Tariffs will need to be increased to allow for full cost recovery when the ADB-financed facilities come into operation. To this end, the Government has assured ADB that (i) tariffs will be increased in phases and (ii) subsidies will be provided to ensure sustainable O&M of the project facilities. The Project will provide capacity building support for tariff reforms and tariff setting, and for financial management to ensure that sufficient funds are allocated for sustainable O&M of the project facilities. The financial sustainability of the subprojects was determined. Annual funds required for capital expenditures during project implementation, and O&M and debt services during operation were forecast and relevant debt coverage ratios were estimated. The Project is considered both financially viable and sustainable.

69. The results of the financial management assessment (FMA) indicate that the EAs have sound financial management systems and adequate experience of managing projects funded by foreign financial institutions. The IAs operate as state-owned enterprises. Accounting and financial management systems for financial reporting and accounting were adequate for loan implementation, although there is potential to improve internal control procedures. As some of the IAs do not have experience of working with externally funded projects, training for the IAs on ADB procedures and requirements related to procurement, disbursement, financial reporting,

20 monitoring, internal control, financial management, and anticorruption safeguards will need to be provided under the training component of the Project.

D. Economic Aspects

70. The Project is an integral part of the ongoing provincial, municipal, and river basin environmental programs, contributing significantly to pollution control in the SRB. Public perceptions and preferences have been evaluated using household and business surveys. These showed that water supply, wastewater management, and solid waste management (SWM) rank highest in priority when compared with a range of other public services. A quantitative economic analysis also demonstrates the value of the Project. The economic analysis was conducted for 25 years (including project construction) in accordance with ADB’s Guidelines for the Economic Analysis of Projects. Project benefits and costs were estimated on a with-project and without-project basis. Costs were divided into tradable and nontradable costs, and benefits were adjusted to account for nonincremental and incremental benefits. Incremental economic benefits were valued on the basis of willingness to pay. For the Heilongjiang subprojects, the estimated economic internal rate of return (EIRR) ranges from 13.6% to 34.7%, with an average EIRR of 19.5%. For the Jilin subprojects the EIRR ranges from 17.2% to 20%, with an average EIRR of 18.4%. The EIRR for the Heilongjiang and Jilin components exceeds the economic opportunity cost of capital, assumed at 12%. The economic analysis is in Appendix 12. The detailed economic analysis is in Supplementary Appendix L.

E. Environmental Aspects

71. The Government has met the requirements of ADB’s Environment Policy (2002). Extensive public consultations involving meetings with stakeholders, focus group discussions, and surveys were undertaken twice during the preparation of the domestic environmental impact assessments (EIAs). The EIAs summarize the environmental impacts, mitigation measures, and monitoring plans. The environmental management plan (EMP), prepared as part of the EIA, will guide environmental mitigation and monitoring under the Project. All the EIAs have been approved by the Heilongjiang Provincial Environmental Protection Department (HEPD) and Jilin Provincial Environmental Protection Department (JEPD). The summary environmental impact assessment (SEIA) and the EMP have been confirmed by the Government. The SEIA concludes that the Project will have substantial positive environmental and socioeconomic benefits. The SEIA was circulated to the ADB Board and posted on the ADB website on 11 July 2008.

72. The environmental benefits of the Project include: (i) reducing pollution loads to Songhua River and its tributaries significantly by intercepting and treating raw sewage currently discharged into the rivers and its tributaries;42 (ii) significantly improving the quality of water for Harbin residents by reducing wastewater discharge into the river; (iii) improving sanitation and hygiene by providing clean water;43 and (iv) improving the quality of life by enhancing SWM.44 The SEIA and EIA reports concluded that adverse impacts on the physical and natural environment during the construction and operational stages of the Project would be insignificant when the mitigation measures specified in the SEIAs and EMPs are appropriately implemented. The incremental costs required for mitigation implementation are negligible compared with the cost of the Project. The two EMPs will be further detailed in the design and construction phases.

42 In Fangzheng County, Fujin City, Harbin City, Jiamusi City, Nenjiang County, Qiqihar City, Shuangyashan City, and Tangyuan County of Heilongjiang Province and Dehui City, Gongzhuling City, Fusong County, Jingyu County, Liuhe County, Tonghua County, Yushu City, and Changbaishan Mountain Administrative Area of Jilin Province. 43 For the residents of Fujin City, Tangyuan County, Tonghe County, and Yanshou County of Heilongjiang Province. 44 In Da’an City, Fusong County, Huadian City, Huinan County, Jiaohe City, Jingyu County, Meihekou City, Tongyu County, Yushu City, and Changbaishan Mountain Administrative Area of Jilin Province.

21 The EMPs will be implemented by IAs, monitored and supervised by professional environmental management specialists and local environmental monitoring centers, and reported to the Jilin and Heilongjiang PMOs, HEPD, JEPD, and ADB.

F. Project Risks and Mitigation Measures

73. The Project does not have any unusual technical risks. Conventional engineering designs with proven records of reliable performance are adopted for water supply, wastewater management, and SWM. During project implementation, the consultants will support the two PMOs and IAs to ensure delivered equipment and works comply with the design requirements and quality standards. The following risks could affect timely implementation or economic viability, and reduce the benefits of the Project: (i) amendments and changes to the project county and city master plans; (ii) lack of proper O&M of project facilities; (iii) ineffective organizational structures and inadequate capacity of the IAs, which could result in inefficient project development and delays in implementation; (iv) delays in the provision of counterpart funding; (v) failure of the project counties and cities to increase water, wastewater, and solid- waste tariffs to meet cost recovery targets; and (vi) unforeseen land acquisition and resettlement issues, which could constrain the efficient implementation of the project works and restoration of livelihoods of the affected persons.

74. Risk (i) will be mitigated by synchronizing the project design and implementation schedules with other planned projects in Heilongjiang and Jilin provinces, which will also have specific assurances similar to those covenanted in the Loan Agreement for the proposed Project. Risks (ii) and (iii) will be mitigated through the provision of institutional capacity development for the IAs with the support of consultants. Risks (iv) and (v) will be mitigated through covenanted assurances from the project county and city governments on the provision of counterpart funding and regular tariff review and increases. Risk (vi) will be mitigated by strengthening the internal monitoring and supervision by the two PMOs, project county and city PMOs, and the IAs, and by engaging a qualified external agency to monitor and evaluate resettlement. Several other measures will also help mitigate the project risks: (i) the appointment of project implementation and monitoring consultants, including environmental monitoring consultants, (ii) EMP monitoring and mitigation arrangements, (iii) EMP environmental management training, and (iv) specific assurances from the project county and city governments that the project leading group and PMOs are retained for the entire loan implementation period and beyond. Regarding the enforcement of environmental laws and regulations, the PRC is taking this very seriously and significant progress has been made on this front. Upgrading the State Environmental Protection Agency into the MEP is one example of such seriousness. This is a relatively small risk and the policy dialogue and capacity building under the Project would mitigate it.

V. ASSURANCES

A. Specific Assurances

75. In addition to the standard assurances, the PRC Government, HPG, JPG, and county and city governments provided the following assurances which will be incorporated into the Loan and Project Agreements. The full list of assurances is in the Loan and Project Agreements and Supplementary Appendix M.

(i) Counterpart financing. HPG and JPG will, and will cause the concerned county/city governments to, ensure that all local cost financing including cash injection and equity contribution is provided for the Project on a timely basis to enable the full and timely completion of the Project. HPG and JPG shall, and

22 shall cause the concerned county and city governments to, ensure that in the event of any shortfall of funds or cost overruns, JPG, HPG, and the concerned county and city governments shall make available such funds including foreign exchange as are required to complete the Project.

(ii) Financial ratios and reporting. The HPG, JPG, and county and city governments will ensure that IAs do not incur debt that will allow its debt to equity ratio to be greater than 70:30. Commencing from the third year (2016) of full commercial operation of each subproject, the HPG, JPG, county and city governments will ensure that each concerned IA maintains a ratio of current assets to current liabilities of not less than 1.2:1; and a debt service coverage ratio of at least 1.2 times to ensure operating efficiency and financial sustainability.

(iii) Land acquisition and resettlement. JPG and HPG will, through the concerned county/city governments ensure that: (a) all land and rights-of-way required by the Project are made available in a timely manner, (b) the resettlement plans are implemented promptly and efficiently in accordance with their terms; and the provisions of the resettlement plans are implemented in accordance with all applicable laws and regulations of the Borrower and ADB’s Policy on Involuntary Resettlement, (c) all affected persons are given adequate opportunity to participate in resettlement planning and implementation and that they will be at least as well off as they would have been in the absence of the Project, (d) timely provision of counterpart funds be paid for land acquisition and resettlement activities, and (e) any obligations in excess of the resettlement plan budget estimates shall be met.

VI. RECOMMENDATION

76. I am satisfied that the proposed grants would comply with the Articles of Agreement of the Asian Development Bank (ADB) and, acting in the absence of the President, under the provisions of Article 35.1 of the Articles of Agreement of ADB, I recommend that the Board approve the loan of $200,000,000 to the People’s Republic of China for the Songhua River Basin Water Pollution Control and Management Project from ADB’s ordinary capital resources, with interest to be determined in accordance with ADB’s London-interbank offered rate (LIBOR)- based lending facility; a term of 25 years, including a grace period of 5 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft Loan and Project Agreements presented to the Board.

C. Lawrence Greenwood, Jr. Vice-President

18 November 2008

Appendix 1 23

DESIGN AND MONITORING FRAMEWORK

Design Performance Targets Data Sources and/or Assumptions Summary and/or Indicators Reporting Mechanism and Risks Impact Assumptions

Enhanced urban Water quality of 48 drinking State of the Environment • Timely environment and water sources, including Reports and environmental implementation of the improved public health Songhua Lake, improved to monitoring reports of the 11th Five-Year Plan and quality of life for the class III by 2020 from class IV Heilongjiang and Jilin and other medium - urban residents in the and V in 2007 Environmental Protection and to long-term project counties and Water Resource Departments development plans in cities in Heilongjiang and Water quality of Songhua the project counties Jilin provinces along the River improved to class III by Provincial, city, and county and cities in SRB 2020 from class IV and V in statistical yearbooks Heilongjiang province 2007 and Jilin province Municipal government health • The urban city plans Reduction in the incidence bureau data on drinking water in the project rate of waterborne diseases quality and incidence of counties and cities in direct project beneficiary infectious diseases are successfully areas by 40% by 2020 implemented compared to that in 2007 Annual socioeconomic • Songhua River Basin surveys undertaken as part of Water Pollution PPMS Prevention and Control Master Plan Semi-annual reports by the is effectively PMOs and IAs implemented

Risks

• Urban growth, including influx of migrants, in project counties and cities exceeds forecasts and exerts more pressure on available urban infrastructure • Weak enforcement of environmental laws and regulations • Lack of effective environmental quality monitoring Outcome Assumptions

Reduced pollution and Total pollutants (COD) Water quality monitoring data • Continued growth in improved water supply, discharge in the SRB reduced demand for water wastewater to 81,630 tons/year by 2013 Water supply data (rate of supply, wastewater management, and solid- utilization, service area management, solid waste management in By 2013, water supply coverage and flow volume) by waste and river the SRB subprojects in the project the IA improvement to counties and cities in achieve full capacity Heilongjiang Province Wastewater effluent quality utilization providing drinking water to and quantity monitoring data • Project facilities are 402,800 people by EPD properly operated and maintained Wastewater collection and Solid waste disposal • Supporting treatment rate in the project monitoring data institutional, tariff, counties and cities in and regulatory Heilongjiang and Jilin Annual operational reports of mechanisms are put

24 Appendix 1

Design Performance Targets Data Sources and/or Assumptions Summary and/or Indicators Reporting Mechanism and Risks provinces is increased from the solid waste company by in place for water the 2007 average level of IA supply, wastewater 45% to 80% by 2013 management, and ADB PCR SWM and river Capacity of safe disposal of improvement municipal solid-waste Semi-annual progress reports increased to 869,065 tons/ by the PMOs and the IAs Risks year in Jilin province by 2013 Semi-annual EMP reports by • Improving the PMOs and the IAs environment of project counties and cities is not regarded as a priority by the local government • Lack of government support for institutional strengthening and financial reform processes • Existing pollution control measures do not continue • Insufficient enforcement and control systems • Delays in increasing the tariff and tariff collection rates Outputs Assumptions

1. Component I Improved and expanded Water sales record of the IAs • Effective stakeholder water supply services, participation and and wastewater Demand and production ownership developed treatment in the project statistics (rate of capacity • Strong support from counties and cities in utilization, average and the JPG, HPG, and Heilongjiang Province maximum day demand of the project counties WSC) and cities’ local 1.1 Four WTPs in the Four WTPs in Heilongjiang governments project counties and with additional capacity of WSC drinking water quality • EPD enforces 3 cities in 49,500 m /day , water monitoring program data environmental Heilongjiang transmission pipelines, and monitoring standards Province which distribution network operating Site inspection and project have additional by 2013 implementation reports. Risks capacity and where the distribution Wastewater system data (rate • Resistance from mains is operational of capacity utilization, influent some stakeholders and effluent flow volumes). • Staff of two PMOs, 1.2 Nine WWTPs and Nine WWTPs with a capacity Water supply data, (rate of 3 EA and IA leave after sewers in the of 381,000 m /day, and utilization and flow volumes) receiving training project counties and 199.13 km of sewer pipelines cities in operating by 2013 Receiving water quality Heilongjiang monitoring program data province are operational Quarterly progress reports, PAMs, MTR, PPMS, and 2. Component II PCR Improved and expanded waste water treatment,

Appendix 1 25

Design Performance Targets Data Sources and/or Assumptions Summary and/or Indicators Reporting Mechanism and Risks solid waste Annual financial, operation, management, and river and performance reports of improvement in the IAs project counties and cities in Jilin Province Social, resettlement, and poverty monitoring report by 2.1 Nine WWTPs and Nine WWTPs with a capacity implementation consultants sewers in the of 175,000 m3/day, and project counties and 367.554 km of sewer Compliance status with ADB cities in Jilin pipelines operating by 2013 covenant Province are operational Quarterly progress reports, PAM, MTR, PPMS, and PCR 2.2 10 sanitary landfill 10 well-functioning sanitary facilities in Jilin landfills with capacity of 2,400 Annual financial, operation, province are tons/day with a service life of and performance reports of operational 13–22 years operating by project companies 2013 Semi-annual progress reports 2.3 River improvement Two WWTPs with capacity of by PMO at the source of the 3,100 m3/day, three solid Songhua River is waste transferring stations Semi-annual EMP reports by completed with capacity of 40 tons per PMO day, and 3.83 km of sewer pipelines operating by 2013 Quarterly reports by PMO and IAs 3. Component III PMOs and IAs maintain the Institutional capacity project implementation ADB review missions development for project schedules management The 29 IAs have functioning Boards of Directors and operate as independent corporations by 2009

The 29 IAs provide 199 staff and resources, as indicated in the cost estimates, to implement the Project

The 29 IAs review and improve policies for cost control, internal financial control every 2 years

Tariffs are reviewed annually and adjusted as needed to achieve full cost recovery for water supply by 2014, and wastewater treatment by 2016. Citizens are fully aware of the results of the annual tariff revision process.

26 Appendix 1

Activities with Milestones Inputs

1. Component I ADB

1. 1 Construction of four WTPs and Distribution Mains in Heilongjiang province • Provide $200.0 Activity (1) Design the facilities, undertake land acquisition and resettlement, procure million loan with equipment and vehicles, and recruit 270 permanent staff. timely disbursement Activity (2) Construct four WTPs with a capacity of 49,500 m3/day by 2012. based on the Activity (3) Construct 119.79 km water transmission main (diameter 1400–1600 mm) by construction plan of 2011. civil works.

1.2 Construction of nine WWTPs in Heilongjiang province JPG, HPG, and IAs Activity (4) Design the facilities, undertake land acquisition and resettlement, procure equipment and vehicles, recruit 480 permanent staff. • Provide $196.0 3 Activity (5) Construct nine WWTPs with a capacity of 381,000 m /day by 2013. million in counterpart Activity (6) Construct 199.13 km wastewater collection system by 2012. funds with timely 2. Component II disbursement based on the construction 2.1 Construction of nine WWTPs and Network Upgrade and Expansion in Jilin Province plan of civil works. Activity (7) Design the facilities, procure equipment and vehicles, complete land acquisition and resettlement, recruit 270 permanent staff. • Provide $0.3 million 3 Activity (8) Construct eight WWTPs with capacity of 175,100 m /day by 2012. as cofinancing from Activity (9) Construct 367.554 km of sewer pipelines by 2011. domestic commercial banks. 2.2 Construction of Ten Domestic Solid Waste Management Facility in Jilin Province Activity (10) Design, procure equipment and vehicles, undertake land acquisition and resettlement, recruit 320 permanent staff. Activity (11) Construct 10 well-functioning sanitary landfills with capacity of 2, 400 tons/day with a service life of 13–22 years by 2013. Activity (12) Procure 10 solid waste transport trucks and 15 vehicles to be used in the landfill and transfer station by 2011.

2.3 River improvement at the source of the Songhua River Activity (13) Construct two wastewater treatment stations with capacity of 3,100 m3/day. Activity (14) Construct 3.8 km of sewer pipelines operating by 2013. Activity (15) Construct three solid waste transferring stations with capacity of 40 tons per day. 3. Component III

3.1 institutional Capacity development for Effective Project Management Activity (16) Complete organizational arrangements for the Jilin PMO and Heilongjiang PMO to be able to implement the ADB loan by 2009. Activity (17) Complete necessary organizational arrangements for IAs (hiring staff, set up accounting systems, financial, administrative and human resource policies and procedures) by 2009. Activity (18) Develop plans, budgets, procedures for loan implementation and project control in the Jilin PMO and Heilongjiang PMO Activity (19) Complete JPG PMO and Heilongjiang PMO and IA staff training by 2012 (training in ADB procedures, procurement, pollution control and wastewater treatment, solid waste treatment, environmental monitoring and financial management). Activity (20) Establishment of the PPMS by 2010. ADB = Asian Development Bank, COD = chemical oxygen demand, EA = executing agency, EMP = environmental management plan, EPD = environmental protection department, IA = implementing agency, HPG = Heilongjiang provincial government, JPG = Jilin provincial government, km = kilometer, m2 = square meter, m3 = cubic meter, mm = millimeter, MTR = midterm review, PAM = project administration memorandum, PCR = project completion report, PMO = project management office, PPMS = project performance monitoring system, SRB = Songhua River Basin, WSC = water supply company, WTP = water treatment plant, WWTP = wastewater treatment plant.

Appendix 2 27

URBAN SECTOR ANALYSIS

A. Water Supply for Heilongjiang Component

1. In the Songhua River Basin (SRB), serious pollution of the river has forced cities to use groundwater and reservoirs as their primary source of water supply. For some cities, drinking water quality still does not comply fully with national standards, e.g., for concentrations of iron and magnesium. Pipelines are underdeveloped. Low pressure and supply interruptions are not uncommon. Leaks occur frequently because of aging pipelines, which results in unaccounted for water.

2. The central and provincial governments are focusing increased attention on the inadequate and insufficient water supply in Heilongjiang.

3. According to the statistical yearbooks of the project counties and cities, total water consumption (including domestic and industrial water consumption) for each county and city ranged from 0.7 million m3 to 2.55 million m3 for 2005 and from 0.9 million m3 to 2.55 million m3 for 2006. The length of water supply network for each project county and city ranged from 23.6 kilometers (km) to 58.9 km in 2005 and from 26.2 km to 61 km in 2006. At present, Fujin City has two water treatment plants (WTPs), Tangyuan County and Yanshou County have one WTP, and Tonghe County does not have any water treatment facility. All project counties and cities proposed one new WTP to be built during the period of the 11th Five Year Plan (FYP), with capacity ranging from 9,500 m3/day to 20,000 m3/day. The proposed length of water supply pipelines to be built during the 11th FYP period in the project counties and cities ranges from 16.5 km to 39.7 km.

4. As indicated in the feasibility study reports of the water supply subprojects in Heilongjiang, the projected quantity of water demand for each project county and city by 2010 will increase to between 19,000 m3/day and 40,000 m3/day, with water supply coverage between 75% and 95% of the total population.

B. Wastewater Management for Heilongjiang and Jilin

5. Because of the rapid industrialization in recent years, water quality in the SRB has deteriorated seriously. In 2005, a basin-wide water quality assessment indicated that 34% of the monitored sections within the Songhua River Basin had water quality at or below class V of the PRC National Surface Water Quality Standards (GB3838-2002). In low-flow or frozen seasons, this may even increase to 45%. The most polluted tributaries include the Hulan, Anbang, Namo’er, Huifa, Yinma, Yitong, Ashi, Woken, and Mudanjiang rivers. Water quality in these rivers is at class V, and this has caused significant pollution of the mainstream of the Songhua River. Some counties and cities still do not have any wastewater treatment plant (WWTP) and the untreated wastewater is discharged directly into local rivers which empty into the Songhua River. The lack of adequate wastewater management degrades local river water quality, poses threats to public health, and adversely affects the quality of life and economic growth in Heilongjiang and Jilin provinces. Meanwhile, because of the poor water quality in the Songhua River and its tributaries, many counties and cities are taking groundwater or reservoir as drinking water sources. The proposed Project provides an integrated plan to improve the water supply and wastewater management in the SRB.

6. In the project counties and cities of Heilongjiang province, the total volume of wastewater discharged (including domestic wastewater and industrial wastewater) ranged from

28 Appendix 2

1.65 million m3 to 154.77 million m3 in 2006. The length of the sewers in each project county and city ranged from 6.1 km to 158.0 km in 2006. Available data indicate that none of the project counties or cities have WWTPs in place, except for Harbin and Qiqihar which have two WWTPs each. During the period of the 11th FYP, all project counties and cities proposed one new WWTP to be built, with treatment capacity ranging from 6,000 m3/day to 100,000 m3/day. The length of the proposed sewage networks ranges from 2.5 km to 48.5 km for the project counties and cities.

7. In Jilin province, the total volume of wastewater discharged for each project county and city ranged from 3.36 million m3 to 26.65 million m3 in 2006. The length of sewers in the project county and cities ranged from 12.8 km to 225.0 km in 2006. None of the project counties and cities has a WWTP, except for Gongzhuling City which has one plant. All the project counties and cities have plans to build one or two WWTPs during the 11th FYP period, with treatment capacity ranging from 15,000 m3/day to 100,000 m3/day. The length of proposed sewers to be built during the same period ranges from 19.4 km to 65.9 km.

8. Recognizing that adequate environmental protection and pollution controls are essential for sustainable economic growth, the Heilongjiang and Jilin provincial governments and project counties and cities have incorporated environmental protection as a first priority in their development strategy. In the 11th FYP, both provinces plan to build more wastewater treatment plants. As set forth in the 11th FYP for environmental protection of Heilongjiang Province, the urban wastewater treatment capacity will be expanded by 1.80 million m3/day, requiring a total investment of CNY5.453 billion ($790.3 million). According to the Jilin provincial 11th FYP for environmental protection, the urban wastewater treatment capacity will be expanded by 1.845 million m3/day; 1,631 km of new sewage network will be built; and 491,000 m3/day of effluent will be re-used, requiring a total investment of CNY5.965 billion ($864.5 million).

9. A total of 40 WWTPs in Heilongjiang Province and 38 in Jilin Province will be constructed during the 11th FYP period as part of the Songhua River Basin Water Quality and Pollution Control Management Plan. The feasibility study reports of each subproject, note that the projected quantity of wastewater discharged from each project county and city in Heilongjiang Province by 2010 will range from 9,000 m3/day to 333,000 m3/day and that of Jilin Province will range from 3,000 m3/day to 31,000 m3/day. The proposed Project will help the project counties in Heilongjiang achieve a wastewater treatment rate of 70% by 2012. It will also help the counties and cities in Jilin province achieve a 90% wastewater treatment rate by 2012.

10. The proposed WWTPs under the Project will help to (i) reduce pollutant discharge loads significantly to the tributaries of Songhua River by intercepting direct discharges of raw sewage into the rivers, (ii) significantly improve the water quality of the drinking water source to downstream counties and cities by reducing wastewater discharge into the river, (iii) improve sanitation and hygiene for urban residents by improving wastewater management in project counties and cities, and (iv) facilitate local sustainable economic growth by water reuse and improved water quality in the receiving rivers.

C. Domestic Solid Waste Management

11. The PRC is experiencing a fast increase in solid waste quantities. In 2006, PRC surpassed the United States as the world’s largest waste generator, and by 2030, the PRC’s annual solid waste quantities will increase by another 150%—growing from about 150 million tons in 2006 to over 480 million tons in 2030. The social, financial, and environmental impacts of this growing waste stream are significant. By 2004, a domestic solid waste collection service

Appendix 2 29 was provided to a total population of 12 million people in the urban areas of Jilin Province. Of the estimated 6.1 million tons per year total domestic solid waste generated, 94.6% of the total was properly collected, and only about 17.5% of the total was disposed of properly by sanitary landfills and incineration plants.

12. There are six sanitary landfills under construction and one operational sanitary landfill in Jilin province with a total treatment capacity of 5,210 tons/day and a total investment of CNY502.5 million. The only existing sanitary landfill has a design capacity of 2,600 tons/day. Only five out of 49 counties and cities in Jilin province have sanitary landfills under construction or operation. Under the 11th FYP, the proper disposal rate for the domestic solid waste will increase from 17.5% to 60% by the end of 2010. Currently, about 250 tons/day of sludge is generated by the water treatment plants and wastewater treatment plants in Jilin province. The sludge is disposed of in landfills operated by the municipal water service authorities.

13. The Government started to levy a solid waste disposal fee of about CNY3 to CNY5 per household per month in the five major cities of Jilin Province in 2008. Construction of sanitary landfills and waste transfer stations is a major undertaking for the government; the designed total capacity of about 2,400 tons/day under the proposed Project accounts for about 14% of the total domestic solid waste generated in Jilin province, and thus contributes significantly to pollution controls and the Government’s domestic solid waste sanitary disposal goals.

30 Appendix 3

EXTERNAL ASSISTANCE

Date of Amount No. Name Approval ($ million) A. Loans 1205 Environmental Improvement Project 10 Dec 92 103.00 1270 Tangshan and Chengde Environmental Improvement Project 25 Nov 93 140.00 1313 Dalian Water Supply Project 20 Sep 94 160.00 1336 Beijing Environment Improvement Project 29 Nov 94 157.00 1490 Anhui Environmental Improvement Project 26 Nov 96 28.00 1491 Anhui Environmental Improvement Project (Industrial Component) 26 Nov 96 112.00 1543 Xi’an-Xianyang-Tongchuan Environment Improvement Project 24 Sep 97 156.00 1544 Zhejiang-Shanxi Water Supply (Phase I) Project 24 Sep 97 100.00 1636 Fuzhou Water Supply and Wastewater Treatment 30 Sep 98 102.00 1692 Suzhou Creek Rehabilitation Project 29 Jun 99 300.00 1797 Tianjin Wastewater Treatment and Water Resources Protection 11 Dec 00 130.00 1985 Hebei Province Wastewater Management Project 19 Dec 02 82.36 1995 Harbin Water Supply Project 11 Mar 03 100.00 1996 Wastewater Management Project 25 Apr 03 83.00 2175 Jilin Water Supply and Sewerage Development 18 Jul 05 100.00 2176 Fuzhou Environmental Improvement 29 Jul 05 55.80 2207 Henan Wastewater Management and Water Supply Sector 9 Dec 05 100.00 2237 Shandong Hai River Basin Pollution Control Project 21 Jun 06 80.00 2239 Guangxi Nanning Urban Environmental Upgrading Project 26 Jun 06 100.00 2240 Wuhan Wastewater and Stormwater Management Project 26 Jun 06 100.00 2297 Qinhuai River Environmental Improvement 18 Dec 06 100.00 2328 Anhui Urban Environment Improvement 24 Apr 07 150.00 2360 Jilin Urban Environmental Improvement 29 Oct 07 100.00 2388 Qingshuihai Water Supply 12 Dec 07 80.00 2407 Gansu Baiyin Urban Development 23 Jan 08 80.00 2420 Xinjiang Municipal Infrastructure and Environmental Improvement 23 Apr 08 105.00 Subtotal (A) 2,904.16 B. Advisory Technical Assistance 987 Institutional Strengthening of National Environmental Protection Agency 10 Jun 88 0.34 1436 Environmental Impact Assessment and Training 10 Dec 90 0.60 1464 Management of Environment and Natural Resources in Hainan 11 Jan 91 0.60 1621 Beijing Region Water Resources Management 30 Mar 92 0.26 1772 Institutional Strengthening of the Qingdao Environmental Protection 30 Oct 92 0.60 Bureau 1835 Haihe Basin Environmental Management and Planning Study 31 Dec 92 1.24 1916 Institutional Strengthening of the Environmental Protection Bureau 28 Jul 93 0.45 1988 Environmental Impact Assessment and Training Phase II 18 Nov 93 0.90 2015 Urban Environmental Improvement Planning 14 Dec 93 0.48 2090 Legislative Reform for Protecting the Environment and Natural Resources 18 May 94 0.50 2210 Capacity Building of the Beijing Municipal Environmental Protection 29 Nov 94 0.60 Bureau and Affiliated Agencies 2398 Improving Environmental Monitoring and Enforcement in Henan 15 Sep 95 0.09 2456 Pilot Environmental Plans for Selected Medium-Size Cities 4 Dec 95 0.54 2504 Seminar on BOT in Water Supply Sector 22 Dec 95 0.10 2505 Strengthening the Environmental Standards and Enforcement 22 Dec 95 0.60 2693 Formulation of Integrated Environmental Management Plans for the Chao Lake Basin 26 Nov 96 0.80 2726 Water Quality Management Planning for Suzhou Creek 23 Dec 96 0.60 2726 Water Quality Management Planning for Suzhou Creek (Supplementary) 13 Feb 98 0.40 2751 Capacity Building of Wastewater Treatment Operations in Anhui 27 Jan 97 0.40 2773 Water Supply Tariff Study 24 Mar 97 0.60 2804 BOT Chengdu Water Supply Project 2 Jun 97 0.60 2817 Strategic Operations for the Water Sector (including supplementary) 26 Jun 97 1.24 2873 Improvement of Environmental Management in Shanxi Province 24 Sep 97 0.94 2906 Leadership Training on Urban Environmental Management in Key Cities 3 Nov 97 0.60 2951 Promotion of Market-Based Instruments for Environmental Management 16 Dec 97 0.70

Appendix 3 31

Date of Amount No. Name Approval ($ million) 2975 Environmental Impact Assessment Training and Curriculum Development 31 Dec 97 0.60 3079 TA Cluster to the PRC for the Promotion of Clean Technology 29 Sep 98 3.50 3095 Hai River Basin Wastewater Management and Pollution Control 10 Nov 98 0.57 3211 Improving Environmental Management in Suzhou Creek 29 Jun 99 0.84 3250 Water Tariff Study II 3 Sep 99 0.95 3377 Urban Poverty Study 27 Dec 99 0.41 3447 Strengthening Urban Solid Waste Management 25 May 00 0.60 3588 Transjurisdiction Environment Management (TA Cluster) 11 Dec 00 2.10 3749 National Guidelines for Urban Wastewater Tariffs and Management Study 25 Oct 01 0.70 4061 Songhua River Water Quality and Pollution Control 10 Jan 03 1.00 4095 Policy Reform Support 11 April 03 0.15 4215 Safe Drinking Water and Sanitation for the Rural Poor 12 Nov 03 0.40 4335 Town-Based Urbanization Strategy Study 06 May 04 0.75 4694 Urban Poverty Strategy Study II 23 Nov 05 0.30 4702 Study on Sustainable Urbanization in Metropolitan Regions 28 Nov 05 0.50 4967 Study on Market-Based Instruments for Water Pollution Control Policy 11 Sep 07 0.50 7002 Urban Wastewater and Solid Waste Management for Small Cities and Towns 10 Dec 07 1.00 7083 Urban Wastewater Reuse and Sludge Utilization Policy Study 26 May 08 1.00 Subtotal (B) 30.71 C. Project Preparatory Technical Assistance 1549 Qingdao Environmental Improvement Project 18 Jul 91 0.10 1831 Tangshan and Chengde Environmental Improvement Project 31 Dec 92 0.10 1852 Dalian Water Supply Project 10 Mar 93 0.10 1917 Beijing Environment Improvement Project 28 Jul 93 0.60 2187 Anhui Municipal Wastewater Treatment 19 Oct 94 0.28 2445 Xi’an-Xianyang-Tongchuan Environment Improvement Project 16 Nov 95 0.50 2511 Zhejiang-Shanxi Water Conservancy 26 Dec 95 1.00 2770 Fuzhou Water Supply and Wastewater Treatment 14 Mar 97 0.60 2901 Shanxi Environment Improvement Project 21 Oct 97 0.59 3049 Zhejiang-Shanxi Water Supply (Phase II) 21 Jul 98 0.54 3095 Hai River Basin Wastewater Management and Pollution Control 10 Nov 98 0.57 3215 Heilongjiang Water Supply 1 Jul 99 1.00 3216 Tianjin Wastewater Treatment and Water Resources Protection 2 Jul 99 0.80 3488 Hebei Province Wastewater Treatment 30 Aug 00 0.85 3571 Harbin Water Supply 12 Dec 00 0.72 3638 Wuhan Wastewater Treatment (including supplementary) 19 Mar 01 0.70 3863 Mudanjiang Water Supply 15 May 02 0.15 4014 Fuzhou Environmental Improvement Project 5 Dec 02 0.60 4223 Shandong Hai River Basin Pollution Control Project 21 Nov 03 0.60 4227 Jilin Water Supply and Sewerage Development 26 Nov 03 0.65 4233 Henan Wastewater Management 3 Dec 03 0.80 4385 Guangxi Nanning Urban Infrastructure Development Project 3 Sep 04 0.56 4436 Wuhan Wastewater and Stormwater Management 18 Nov 04 0.70 4617 Nanjing Qinhuai River Environmental Improvement Project 19 Jul 05 0.60 4628 Hefei Urban Environment Improvement 9 Aug 05 0.75 4804 Jilin Urban Infrastructure Project 22 Jun 06 0.50 4805 Xinjiang Municipal Infrastructure and Environmental Improvement Project 23 Jun 06 0.80 4808 Kunming Qingshuihai Water Supply Project 29 Jun 06 0.60 4818 Gansu Baiyin Urban Development Project 19 Jul 06 0.50 4930 Xinjiang UrbanTransport and Environmental Improvement Project 11 May 07 0.70 4959 Small Cities and Towns Development Demonstration Sector Projects 6 Aug 07 1.70 4960 Guangxi Wuzhou Urban Development Project 9 Aug 07 0.50 4971 Songhua River Basin Water Pollution Control and Management 28 Sep 07 1.30 7108 Urban-Rural Infrastructure Development Demonstration Project 29 Jul 08 0.90 Subtotal (C) 21.96 Total for Technical Assistance (B+C) 52.67 BOT = build-operate-transfer, PRC = People’s Republic of China, TA = technical assistance. Source: Asian Development Bank.

32 Appendix 4

DETAILED DESCRIPTION OF PROJECT COMPONENTS

1. The Project has three components broken down into five subcomponents (outputs) and 20 activities as indicated in the design and monitoring framework. The components include improved water supply and wastewater services in Heilongjiang province; improved wastewater facilities, solid waste management (SWM), and river improvement in Jilin province; and institutional capacity building for efficient project implementation and management for both provinces.

2. Component I. The Heilongjiang urban infrastructure component has two subcomponents: (i) water supply and (ii) wastewater treatment covering 13 subprojects. The first subcomponent includes the construction of four water treatment plants (WTPs) with a total capacity of 49,500 cubic meters per day (m3/day) and 120 kilometers (km) of water transmission pipelines. The second subcomponent includes the construction of nine wastewater treatment plants (WWTPs) with a cumulative treatment capacity of 381,000 m3/day and 199 km of sewer pipelines.

3. Component II. The Jilin component has three subcomponents covering 15 subprojects: (i) wastewater treatment, (ii) SWM, and (iii) river improvement. The first subcomponent includes the construction of nine WWTPs with a cumulative capacity of 178,000 m3/day and 367.6 km of sewer pipelines. The second subcomponent includes the construction of 10 sanitary landfill facilities with a cumulative capacity of 2,400 tons per day with a service life ranging from 13 to 22 years. The third subcomponent includes river improvement at the source of the Songhua River including (i) two WWTPs with capacity of 3,100 m3/day, (ii) three solid waste transfer stations with a total capacity of 40 tons per day, and (iii) 3.8 km of sewer pipelines.

4. Component III. This component provides for institutional capacity development for effective project management including (i) providing training to strengthen organizational structures and staff resources to implement, operate, and maintain the project components; (ii) strengthening management practices in human resources, finance, and corporate planning; and (iii) providing support for the Government’s public awareness program to ensure sustainability of project benefits.

Table A4. 1: Subprojects in Heilongjiang Province

Subproject Description A. Water Supply 1. Fujin City Capacity: 20,000 m3/day Water Supply Expansion 36.828 km of water distribution networks (Fujin City Zhongfu Water Supply 5 deep pumped wells Co.)

2. Tangyuan County Capacity: 10,000 m3/day Water Supply 5 pumped wells (Tangyuanq County Water 1 km of water supply pipelines from wells Supply Co.) 15.48 km of water distribution networks

3. Tonghe County Capacity: 9,500 m3/day Water Supply Expansion 6 deep pumped wells with 6 pump stations (Tonghe County Water Supply 26.758 km of distribution networks and Drainage Co.)

Appendix 4 33

Subproject Description 4. Yanshou County Capacity: 10,000 m3/day Water Supply Expansion 39.727 km of distribution networks with pipelines (Yanshou County Water Supply Co.)

B. Wastewater Management 1. Fangzheng County 6,000 m3/day of waste water treatment plant with high-density WWTP + Sewerage Network sedimentation tanks and biological aerated filter technology (Fangzheng County Water 24.995 km of sewer networks Supply and Drainage Co.)

2. Fujin City 20,000 m3/d of wastewater treatment plant with high-density sedimentation WWTP tanks and biological aerated filter technology (Fujin City Zhongfu Water Supply Service population: 137,000 (2012), 165,000 (2020) Co.)

3. Harbin City 100,000 m3/day of wastewater treatment plant with Modified A2/O Xinyigou District WWTP technology (Harbin City Inland River 34.35 km of sewer networks; Comprehensive Development Co.)

4. Jiamusi City East District 40,000 m3/d of effluent reuse plant with air filtration technology WWTP + Effluent Reuse 18.67 km of reuse water supply pipeline (New Era Urban Infrastructure Used as supplementary supply of cooling water for a power plant Construction Investment Jiamusi Co., Ltd.)

5. Nenjiang County 15,000 m3/day of wastewater treatment plant with Modified A2/O WWTP + Sewerage Network technology (Nengjiang County Water Supply 11.728 km of sewer networks Co.)

6. Qiqihar City 100,000 m3/day of wastewater treatment plant with CASS technology WWTP (Phase II) 2.5 km of sewer network (Qiqihar City Hecheng Wastewater Treatment Co., Ltd)

7. Qitaihe City 40,000 m3/day of effluent reuse plant with CASS technology Effluent Reuse 8.5 km of reuse water supply pipeline (Qitaihe City Qingyuan Drainage Used as supplementary supply of cooling water for Qitaihe Datang Power Co., Ltd.) Generation Co. Ltd.

8. Shuangyashan City 50,000 m3/day of wastewater treatment plant with Modified A2/O WWTP technology (Shuangyashan City Changyuan 21.8 km of sewer networks Drainage Co., Ltd.)

9. Tangyuan County 10,000 m3/day of wastewater treatment plant with high-density WWTP sedimentation tanks and biological aerated filter technology (Tangyuan County Xingyuan 48.53 km of sewer networks Urban Construction Investment Co., Ltd.)

A2/O = anaerobic/anoxix/aerobic, CASS = cyclic activated sludge system, km = kilometer, m3 = cubic meter, WWTP = wastewater treatment plant. Source: Asian Development Bank.

34 Appendix 4

Table A4. 2: Subprojects in Jilin province

Subproject Description A. Wastewater Management 1. Dehui City 30,000 m3/day of domestic sewage with A2/O technology WWTP 12.65 km wastewater interception main pipelines, 16.395 km sewer main (Dehui City Tianyi Water Co., pipelines and upgrade 6.702 km sewer pipelines Ltd.)

2. Gongzhuling City 20,000 m3/day of wastewater treatment plant with BIOLAK technology Fanjiatun Town WWTP 48 km of sewer pipelines (Gongzhuling City Urban State- End of construction: 2012/12 Owned Assets Operations Co., Ltd.)

3. Gongzhuling City 59 km of sewer pipelines for urban sewage networks upgrade Sewage Network Upgrade 1 booster pumping station (Gongzhuling City Urban State- Owned Assets Operations Co., Ltd.)

4. Fusong County WWTP 20,000 m3/day of wastewater treatment plant with CAST technology (Fusong County Lantianbishui 32 km of sewer pipelines Infrastructure Development Co., Ltd.)

5. Fuyu County 30,000 m3/day of wastewater treatment plant with BIOLAK technology WWTP 51.792 km of combined sewage and stormwater sewers (Fuyu County Wastewater Treatment Co., Ltd.)

6. Jingyu County 20,000 m3/day of wastewater treatment plant with BIOLAK technology WWTP 55.01 km of sewer pipelines (Jingyu County Yutong Municipal Engineering Co., Ltd.)

7. Liuhe County 10,000 m3/day of wastewater treatment plant with Hydrolysis-AICS WWTP technology (Liuhe County Bishui Wastewater 19.44 km of sewer pipelines Treatment Co., Ltd.)

8. Tonghua County WWTP 15,000 m3/day of wastewater treatment plant with CAST technology (Tonghua County Water Supply 39 km of sewer pipelines Co.)

9. Yushu City WWTP 30,000 m3/day of wastewater treatment plant with CASS technology (Fanhua Water (Yushu) Co., Ltd.) 18.56 km of sewer pipelines

B. Solid Waste Management 1. Da’an City SWM Sanitary landfill with a total capacity of 3.0945 million m3 and daily (Da’an City Xingcheng Urban processing capacity of 260 t/day of domestic solid wastes Infrastructure Development and 22 years of service life Construction Co., Ltd.)

2. Fusong County SWM Sanitary landfill with a total capacity of 657,000 m3 and daily processing (Fusong County Lantianbishui capacity of 150 t/day of domestic solid wastes Infrastructure Development Co., 10 years of service life Ltd.)

3. Huadian City SWM Sanitary landfill with a total capacity of 3.44 million m3 and daily (Huandian City Solid Waste processing capacity of 410 t/day of domestic solid wastes Treatment Co., Ltd.) 17 years of service life

Appendix 4 35

Subproject Description 4. Huinan County SWM Sanitary landfill with a total capacity of 1.44 million m3 and daily (Huinan County Chaoyang processing capacity of 180 t/day of domestic solid wastes Township Huashu Domestic Solid 15 years of service life Waste Treatment Service Co., Ltd.)

5. Jiaohe City SWM Sanitary landfill with a total capacity of 1.78 million m3 and daily (Jiaohe City Jiemei Solid Waste processing capacity of 250 t/d of domestic solid wastes Co.) 16.8 years of service life

6. Jingyu County SWM Sanitary landfill with a total capacity of 893,200 m3 and daily processing (Jingyu County Huanyu Domestic capacity of 91 t/d of domestic solid wastes Solid Waste Management Co., 19 years of service life Ltd.)

7. Liuhe County SWM Sanitary landfill with a total capacity of 1.26 million m3 and daily (Liuhe County Luyuan Domestic processing capacity of 180 t/d of domestic solid wastes Solid Waste Management and 19 years of service life Service Co., Ltd.)

8. Meihekou City SWM Sanitary landfill with a total capacity of 3.60 million m3 and daily (Meihekou City Jiecheng processing capacity of 400 t/d of domestic solid wastes Domestic Solid Waste Collection, 17 years of service life Transportation and Treatment Co., Ltd.)

9. Tongyu County SWM Sanitary landfill with a total capacity of 2.128 million m3 and daily (Tongyu County Hecheng processing capacity of 170 t/d of domestic solid wastes Domestic Solid Waste Sanitary 24 years of service life Landfill)

10. Yushu City SWM Sanitary landfill with a total capacity of 1.47 million m3 and daily (Fanhua Water (Yushu) Co., Ltd.) processing capacity of 250 t/d of domestic solid wastes 13 years of service life

C. Integrated River Improvement 1. Changbaishan Integrated River 2 wastewater treatment stations with total capacity of 3,100 m3/day in Improvement Baixi Town (2,000 m3/d) and Manjiang Town (1,100 m3/day), effluent will (Changbaishan Development and be fully used for landscaping and car washing, etc. in summer and snow- Construction Group Co., Ltd.) making in winter Sewers + effluent reuse pipelines: 17.39 km, including 3.83 km sewer pipelines and 4.8 km effluent reuse pipelines in Baixi Town, and 8.63 km sewer pipelines in Manjiang Town 3 solid waste transfer stations with total capacity of 40 t/d in Baixi Town (15 tons/day), Manjiang Town (5 t/d), and Donggang Town (20 t/d) Service population: 42,500 present permanent residents in Baixi

A2/O = anaerobic/anoxix/aerobic, CASS = cyclic activated sludge system, km = kilometer, m3 = cubic meter, SWM = solid waste management, WWTP = wastewater treatment plant. Source: Asian Development Bank.

COST ESTIMATES AND FINANCING PLAN 36 Table A5.1: Cost Estimates Components by Financiers ($ million)

Asian Development Bank Domestic Banks Private Sector Equity State Bonds Local Gov't Equity and Tariffs Total 5 Appendix Item Amount % Amount % Amount % Amount % Amount % Amount %

A. Heilongjiang Component Water Supply Civil Works 0.63 30.40 0.00 0.00 0.00 0.00 1.45 69.60 0.00 0.00 2.09 100.00 Survey and Design 0.00 0.00 0.00 0.00 0.00 0.00 2.51 100.00 0.00 0.00 2.51 100.00

Equipment 11.46 81.60 0.00 0.00 0.00 0.00 0.03 0.20 2.55 18.20 14.04 100.00 Land Acquisition and Resettlement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.71 100.00 0.71 100.00 Subtotal 12.09 62.50 0.00 0.00 0.00 0.00 3.99 20.60 3.26 16.90 19.35 100.00 Wastewater Treatment Civil Works 12.15 26.90 0.29 0.60 0.00 0.00 32.71 72.40 0.00 0.00 45.15 100.00 Survey and Design 0.00 0.00 0.00 0.00 0.51 4.30 2.69 22.60 8.68 73.10 11.88 100.00 Equipment 63.79 89.10 0.00 0.00 0.79 1.10 7.03 9.80 0.00 0.00 71.61 100.00 Land Acquisition and Resettlement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.88 100.00 3.88 100.00 Subtotal 75.95 57.30 0.29 0.20 1.30 1.00 42.42 32.00 12.56 9.50 132.51 100.00 B. Jilin Component Wastewater Treatment Civil Works 13.16 40.40 0.00 0.00 0.00 0.00 14.17 43.50 5.25 16.10 32.57 100.00 Survey and Design 0.00 0.00 0.00 0.00 0.00 0.00 5.57 100.00 0.00 0.00 5.57 100.00 Equipment 27.07 81.90 0.00 0.00 0.00 0.00 0.00 0.00 5.98 18.10 33.05 100.00 Land Acquisition and Resettlement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.50 100.00 3.50 100.00 Subtotal 40.23 53.90 0.00 0.00 0.00 0.00 19.74 26.40 14.72 19.7 74.69 100.00 Solid Waste Management Civil Works 20.54 58.40 0.00 0.00 0.00 0.00 0.00 0.00 14.66 41.70 35.20 100.00 Survey and Design 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.15 100.00 6.15 100.00 Equipment 19.27 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 19.27 100.00 Land Acquisition and Resettlement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.24 100.00 13.24 100.00 Subtotal 39.81 53.90 0.00 0.00 0.00 0.00 0.00 0.00 34.05 46.10 73.86 100.00 Integrated River Improvement Civil Works 0.46 21.10 0.00 0.00 0.00 0.00 0.00 0.00 1.73 78.90 2.20 100.00 Survey and Design 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.71 100.00 0.71 100.00 Equipment 3.76 80.00 0.00 0.00 0.00 0.00 0.00 0.00 0.94 20.00 4.70 100.00 Land Acquisition and Resettlement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.19 100.00 0.19 100.00 Subtotal 4.23 54.20 0.00 0.00 0.00 0.00 0.00 0.00 3.57 45.80 7.80 100.00 C. Project Management/Training and Consulting Services Heilongjiang Consulting Services 0.86 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.86 100.00 Training 0.30 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.30 100.00 Project Management 0.35 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.35 100.00 Subtotal 1.51 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.51 100.00 Jilin Consulting Services 0.65 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.65 100.00 Training 0.30 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.30 100.00 Project Management 0.28 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.28 100.00 Subtotal 1.23 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.23 100.00

Total Base Costa 175.05 56.30 0.29 0.10 1.30 0.40 66.15 21.30 68.16 21.90 310.95 100.00

D. Contingencies Physicalb 0.00 0.00 0.00 0.00 2.13 8.70 0.00 0.00 22.35 91.30 24.48 100.00 Pricec 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 35.93 100.00 35.93 100.00 Subtotal 0.00 0.00 0.00 0.00 2.13 3.50 0.00 0.00 58.28 96.50 60.41 100.00 E. Financing Charges during Implementationd Heilongjiang 10.45 99.80 0.02 0.20 0.00 0.00 0.00 0.00 0.00 0.00 10.47 100.00 Jilin 14.50 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.50 100.00 Subtotal 24.95 99.90 0.02 0.10 0.00 0.00 0.00 0.00 0.00 0.00 24.97 100.00

Total Project Coste 200.00 50.50 0.31 0.10 3.43 0.90 66.15 16.70 126.44 31.90 396.33 100.00 a In May 2008 prices, inckuding taxes and duties of $11.06 million. b Computed at 8% for civil works, equipment, training, and consulting services. c Computed, based on foreign exchange inflation rate of 6.8% in 2008, 0.7% in 2009, 1.4% in 2010, 0.4% in 2011, 0.5% in 2012 and onwards; and local currency infaltion rate of 5.5% in 2008, 5.0% in 2009 and onwards; and includes provision for exchange rate fluctuation under assumption of purchasing power parity exchange rate. d Includes interest and commitment charges for both ADB loans and domestic bank loans. Interest during construction for the ADB loan has been computed at the 5-year forward LIBOR of 3.68% plus a spread of 0.2%. e Includes taxes and duties of $11.06 million. Source: Asian Development Bank estimates.

Appendix 5 37

Table A5.2: Cost Estimates Components Project Cost Summary

CNY Million $ Million Item Foreign Local Total Foreign Local Total A. Base Cost 1. Heilongjiang Component a. Water Supply 1. Fujin City Water Supply 21.91 14.70 36.61 3.13 2.10 5.23 2. Tangyuan County Water Supply 28.91 5.11 34.02 4.13 0.73 4.86 3. Tonghe County Water Supply 25.06 10.01 35.07 3.58 1.43 5.01 4. Yanshou County Water Supply 18.76 12.32 31.08 2.68 1.76 4.44 b. Wastewater Treatment 1. Fangzheng County WWTP + Sewerage Network 29.68 7.91 37.59 4.24 1.13 5.37 2. Fujin City WWTP 24.99 16.66 41.65 3.57 2.38 5.95 3. Harbin City Sinyigou District WWTP 245.21 114.38 359.59 35.03 16.34 51.37 4. Jiamusi City East District WWTP+Effluent Reuse 31.22 22.05 53.27 4.46 3.15 7.61 5. Nenjiang County WWTP+Sewerage Network 24.92 16.73 41.65 3.56 2.39 5.95 6. Qiqihar City WWTP (Phase II) 86.94 63.49 150.43 12.42 9.07 21.49 7. Qitaihe City Effluent Reuse 38.08 28.49 66.57 5.44 4.07 9.51 8. Shuangyashan City WWTP 95.13 31.50 126.63 13.59 4.50 18.09 9. Tangyuan County WWTP 48.93 10.50 59.43 6.99 1.50 8.49 Subtotal (A1) 719.74 353.85 1073.59 102.82 50.55 153.37

2. Jilin Component a. Wastewater Treatment 1. Dehui City WWTP 46.29 27.63 73.92 6.61 3.95 10.56 2. Gongzhuling City Fanjiatun Town WWTP 43.33 25.90 69.23 6.19 3.70 9.89 3. Gongzhuling City Sewage Network Upgrade 32.20 19.18 51.38 4.60 2.74 7.34 4. Fusong County WWTP 34.58 20.58 55.16 4.94 2.94 7.88 5. Fuyu County WWTP 47.81 22.82 70.63 6.83 3.26 10.09 6. Jiangyu County WWTP 41.02 24.57 65.59 5.86 3.51 9.37 7. Liuhe County WWTP 19.60 11.83 31.43 2.80 1.69 4.49 8. Tonghua County WWTP 32.48 19.18 51.66 4.64 2.74 7.38 9. Yushu City WWTP 36.26 21.63 57.89 5.18 3.09 8.27 b. Solid Waste Management 1. Da'an City SWM 43.40 25.97 69.37 6.20 3.71 9.91 2. Fusong County SWM 22.61 13.44 36.05 3.23 1.92 5.15 3. Huadian City SWM 62.79 37.87 100.66 8.97 5.41 14.38 4. Huinan County SWM 18.62 11.20 29.82 2.66 1.60 4.26 5. Jiaohe City SWM 33.32 19.81 53.13 4.76 2.83 7.59 6. Jingyu County SWM 10.71 6.44 17.15 1.53 0.92 2.45 7. Liuhe County SWM 19.39 11.69 31.08 2.77 1.67 4.44 8. Meihekou City SWM 56.09 43.45 99.54 8.01 6.21 14.22 9. Tongyu County SWM 5.25 24.85 30.10 0.75 3.55 4.30 10. Yushu City SWM 30.59 23.66 54.25 4.37 3.38 7.75 c. Integrated River Improvement 1. Changbaishan Mountain Administrative Committee 35.21 19.81 55.02 5.03 2.83 7.86

Subtotal (A2) 671.55 431.51 1103.06 95.94 61.64 157.58 Total Base Costs 1391.29 785.36 2176.65 198.76 112.19 310.95 B. Contingencies 218.90 203.95 422.85 31.27 29.13 60.41 Physical Contingencies 108.75 62.58 171.33 15.54 8.94 24.48 Price Contingencies 110.15 141.37 251.52 15.74 20.20 35.93 C. Financing Charges During Implementation 174.66 0.14 174.81 24.95 0.02 24.97 Heilongjiang 73.13 0.14 73.27 10.45 0.02 10.47 Jilin 101.53 0.00 101.53 14.50 0.00 14.50 Total Project Costs 1784.85 989.45 2774.30 254.98 141.35 396.33 SWM = solid waste management, WWTP = wastewater treatment plant. Source: Asian Development Bank estimates.

FLOW OF FUNDS AND ONLENDING ARRANGEMENTS 38

Figure A6.1: Flow of Funds for Heilongjiang Component 6 Appendix

Asian Development Bank Ministry of Finance

(ADB)

Onlending ADB/Counterpart/Local Bank Funds

Direct Payments to Heilongjiang Provincial ADB/Local Bank Repayment Consultants and Suppliers Finance Bureau

Onlending

Counterpart City Finance Country Finance Counterpart Funding Bureaus Bureaus Funding

Onlending Onlending

Implementing Agencies - Fujin City Zhonghu Water Supply Co.

- Harbin City Inland River - Tangyuan County Water Comprehensive Development Supply Co. Co. - Tonghe County Water - Harbin City Inland River Supply and Drainage Co. Commercial Development Construction Commercial - Yanshou County Water Lending Co. Lending - New Era Urban Infrastructure Supply Co. Construction Investment - Fangzheng County Water Jiamusi Co., Ltd. Supply and Drainage Co. - Qiqihar City Hecheng - Nenjiang County Water Wastewater Treatment Co., Supply Co. - Tangyuan County Ltd. - Qitaihe City Qingyuan Xingyuan Urban Drainage Co., Ltd. Construction Investment - Shuangyashan City Co., Ltd. Changyuan Drainage Co., Ltd.

Source: Asian Development Bank.

Figure A6.2: Flow of Funds for Jilin Component

Asian Development Bank Ministry of Finance (ADB)

Onlending ADB/Counterpart/Local Bank Funds

Direct Payments to Jilin Provincial Finance ADB/Local Bank Repayment Consultants and Suppliers Bureau

Onlending

Counterpart City Finance Country Finance Counterpart Funding Bureaus Bureaus Funding

Onlending Onlending

Implementing Agencies - Dehui City Tianyi Water - Fusong County Lantianbishui Co., Ltd. Infrastructure Development Co., Ltd. - Gongzhuling City Urban - Fuyu County Wastewater Treatment State-Owned Assets Co., Ltd. Operation Co., Ltd. - Jingyu County Yutong Municipal - Fanhua Water Co., Ltd. Engineering Co., Ltd. - Da’an City Xingcheng

Lending Commercial - Liuhe County Bishui Wastewater Urban Infrastructure Treatment Co., Ltd. Development and - Tonghua County Water Supply Co. Construction Co., Ltd. - Huinan County Chaoyang Township - Huadian City Solid Waste

Huashu Domestic Solid Waste 6 Appendix Treatment Co., Ltd. Changbaishan Treatment Service Co., Ltd. - Jiaohe City Jiemei Solid Administrative - Jingyu County Huanyu Domestic Waste Co. Committee Finance Bureay Solid Waste Management Co., Ltd.

Commercial Lending - Meihekou City Jiecheng - Liuhe County Luyuan Domestic Domestic Solid Waste 39 Solid Waste Management and Collection, Transportation Service Co., Ltd. and Treatment Co., Ltd. - Tongyu County Hecheng Domestic Solid Waste Sanitary Landfill

Changbaishan Development and Construction Group Co., Ltd.

Source: Asian Development Bank.

40

IMPLEMENTATION SCHEDULE 7 Appendix Table A7.1 Implementation and Construction Schedule of Subprojects in Heilongjiang Province 2008 2009 2010 2011 2012 2013 Item 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 A. Fujin City Supply Expansion Water Treatment Plant Distribution Network B. Tangyuan County Water Supply Water Treatment Plant Distribution Network C. Tonghe County Water Supply Expansion Water Treatment Plant Distribution Network D. Yanshou County Water Supply Expansion Water Treatment Plant Distribution Network E. Fangzheng County WWTP + Sewerage Network Wastewater Treatment Plant Sewer Network F. Fujin City WWTP G. Harbin City Xinyigou District WWTP Wastewater Treatment Plant Sewer Network H. Jiamusi City Eastern District WWTP + Effluent Use Wastewater Treatment Plant Reuse Water Network I. Nenjiang County WWTP + Sewerage Network Wastewater Treatment Plant Sewer Network J. Qiqihar City WWTP (Phase II) Wastewater Treatment Plant Sewer Network K. Qitaihe City Effluent Use Wastewater Treatment Plant Reuse Water Network L. Shuangyashan City WWTP Wastewater Treatment Plant Sewer Network

2008 2009 2010 2011 2012 2013 Item 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 M. Tangyuan County WWTP Wastewater Treatment Plant Sewer Network

WWTP = wastewater treatment plant. Source: Asian Development Bank estimates.

Table A7.2 Implementation and Construction Schedule of Subprojects in Jilin Province 2008 2009 2010 2011 2012 2013 Item 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 A. Dehui City WWTP Wastewater Treatment Plant Sewer Network B. Gongzhuling City Fanjiatun Town WWTP Wastewater Treatment Plant Sewer Network C. Gongzhuling City Sewer Network Upgrade D. Fusong County WWTP Wastewater Treatment Plant Sewer Network E. Fuyu County WWTP Wastewater Treatment Plant Sewer Network F. Jingyu County WWTP Wastewater Treatment Plant Sewer Network G. Liuhe County WWTP Wastewater Treatment Plant Sewer Network H. Tonghua County WWTP Wastewater Treatment Plant Sewer Network I. Yushu City WWTP Wastewater Treatment Plant 7 Appendix Sewer Network

41

42

2008 2009 2010 2011 2012 2013 Item 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 7 Appendix J. Da’an City SWM K. Fusong County SWM L. Huadian City SWM

M. Huinan County SWM N. Jiaohe City SWM O. Jingyu County SWM P. Liuhe County SWM Q. Meihekou City SWM R. Tongyu County SWM S. Yushu City SWM T. Changbaishan Integrated River Rehabilitation Baixi Town WWTP Manjiang Town WWTP Sewer Pipeline Solid Waste Stations

SWM = solid waste management, WWTP = wastewater treatment plant. Source: Asian Development Bank estimates.

Appendix 8 43

PROCUREMENT PLAN

Table A8.1: Project Information Country People’s Republic of China Name of Borrower People’s Republic of China Project Name Songhua River Basin Water Pollution Control and Management Project TA Reference TA 4971-PRC Date of Effectiveness Amount $200 million Of which committed Executing Agency Heilongjiang provincial government and Jilin provincial government Approval Date of Original Procurement Plan Approval of most recent Procurement Plan Media for Publication for Local Advertisements Period Covered by this Plan November 2008–November 2012

Table A8.2: Procurement Thresholds for Goods and Related Services, Works, and Supply and Installation Threshold Procurement Method (Value $) ICB Worksa > 10,000,000 ICB Goods > 1,000,000 NCB Worksb > 100,000 NCB Goods > 100,000 Shopping Works ≤ 100,000 Shopping Goods ≤ 100,000 Exceptional Methods None anticipated ICB = international competitive bidding, NCB = national competitive bidding. a For ICB, prior review and approval by the Asian Development Bank (ADB) of procurement documents, bid evaluation reports, and proposed awards of contracts is required. b For NCB, the first draft English language version of the NCB procurement documents should be submitted for ADB review and approval regardless of the estimated contract amount. Remaining procurement documents under NCB are subject to post review. ADB will review the bid evaluation report and award of contract on a retroactive basis.

Table A8.3: Procurement Thresholds for Consultant Services Threshold Procurement Method (Value $) Quality- and Cost-Based Selection > 200,000 Consultants Qualifications Selection > 100,000 Least-Cost Selection ≤ 100,000 Alternative Methods No alternative methods are proposed

44 Appendix 8

Table A8.4: List of Indicative Contract Packages Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review HEILONGJIANG PROVINCE A. Subproject: Fujin City Water Supply Expansion Civil Works FJWSE/1.1 Construction of structures and installation of equipment of WTP and water Apr 2009 Prior and supply pipeline NCB May 2009 Post FJWSE/1.2 M & E FJWSE/2.1 Procurement of treatment process equipment for WTP expansion and equipment Apr 2010 and for water supply pipeline NCB Post May 2009 FJWSE/2.2 B. Subproject: Tangyuan County Water Supply Civil Works TYWS/1.1 Construction of structures of WTP; installation of distribution pipe, fitting pipe and Apr 2009 Prior TYWS/1.2 effluent pipe; and installation of equipment, fitting, electrical equipment of deep NCB May 2009 Post TYWS/1.3 well and electrical equipment of WTP Jun 2010 Post M & E TYWS/2.1 Procurement of pumps, pipes, valves, and other equipment and materials of the May 2010 TYWS/2.2 water source site; electrical equipment, instruments and analyzing devices, Jun 2010 NCB Post TYWS/2.3 office equipment, maintenance equipment transport vehicles, and heating Jul 2010 TYWS/2.4 equipment of the WTP Apr 2009 C. Subproject: Tonghe County Water Supply Expansion Civil Works THWS/1.1 Construction, procurement and installation of equipment for WTP and water May 2009 Prior NCB THWS/1.2 supply pipe Jun 2009 Post D. Subproject: Yanshou County Water Supply Expansion Civil Works YSWSE/1.1 Construction of all civil works of (i) WTP; (ii) DN300 pipe with a length of 5,000 m YSWSE/1.2 from the WTP to water tower and 2,800 m from the water tower to development YSWSE/1.3 zone (Fangzhuang street); (iii) DN150 pipes of development zone with a length Jan 2009 Post YSWSE/1.4 of 7,737 m; (iv) DN200 pipes with a length of 3,200 m in Donggongan Street, Aug 2008 Prior YSWSE/1.5 Dongtongqing Street and Tianshun Street and DN100 pipes with a length of NCB Sep 2008 Post 9,940 m in 25 streets in the eastern area of Jisheng Street; and (v) DN200 pipes Oct 2008 Post of development zone with the length of 3,000 m in Tongfu Street, Xihongxing Nov 2008 Post Street, Xigongan Street, and Xixinhua Street and DN100 pipes with a length of 6,530 m in 18 streets in the western area of Jisheng Street M and E YSWSE/2.1 Procurement and installation of equipment of the newly built WTP and May 2010 YSWSE/2.2 reconstructive old WTP; steel pipe lined PE with a length of 19,860 m and Feb 2009 YSWSE/2.3 fittings; steel pipe lined PE with a length of 19,607 m and fittings; and DIP pipe NCB Aug 2008 Post YSWSE/2.4 with a length of 1,511 m and fittings Sep 2008 YSWSE/2.5 Oct 2008 E. Subproject: Fangzheng County WWTP + Sewerage Network Civil Works FZWWT/1.1 Construction of civil works of structures of the WWTP; installation of pipe with a Jan 2009 Post FZWWT/1.2 length of 8,815 m from Beisan Street to Beiliu Street; installation of pipe with a Oct 2008 Post NCB FZWWT/1.3 length of 9,965 m from Naner Street to Nanliu Street; and installation of the Nov 2008 Post FZWWT/1.4 interception pipe with a length of 6,215 m Sep 2008 Prior M & E FZWWT/2.1 Procurement and installation of electrical equipment, automatic control Feb 2010 FZWWT/2.2 equipment, maintenance equipment, analyzing devices, transportation vehicle NCB Jan 2010 Post FZWWT/2.3 for the WWTP; process equipment for WWTP; and installation of all pipes and Mar 2010 fittings of the WWTP F. Subproject: Fujin City WWTP Civil Works FJWWT/1.1 Construction of civil works of structures of the WWTP and installation and Apr 2009 Prior NCB FJWWT/1.2 commissioning of all equipment and pipes of the WWTP Dec 2010 Post M & E FJWWT/2.1 Procurement of (i) process equipment,(ii) electrical equipment, and (iii) other Oct 2010 Prior FJWWT/2.2 equipment for the WWTP NCB Nov 2010 Post FJWWT/2.3 Jan 2011 Post G. Subproject: Harbin City Xinyigou District WWTP Civil Works HBWWT/1.1 Construction of civil works of: (i) primary sedimentation tank; (ii) secondary Jan 2009 Post HBWWT/1.2 sedimentation tank; (iii) biological reaction tank and sludge pump station; (iv) Jan 2009 Prior HBWWT/1.3 pump station, blower room, disinfection room, chemical room, water reuse room Feb 2009 Post NCB HBWWT/1.4 and sludge dewatering room; (v) administration building, maintenance room, Mar 2009 Post HBWWT/1.5 power distribution room, storage room, guard gate and other auxiliary structures; Mar 2009 Post HBWWT/1.6 and (vi) concrete ground, road, greening, fence, warming system, pipes, lighting Apr 2009 Post

Appendix 8 45

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review HBWWT/1.7 and other auxiliary projects. Installation of interception pipe on the left bank and Jan 2009 Post HBWWT/1.8 right bank. Installation, commissioning, and test run of equipment, auxiliary Oct 2009 Post HBWWT/1.9 equipment and electrical and automatic control equipment of the WWTP M and E HBWWT/2.1 Procurement of: (i) interception pipe on the left bank and right bank; (ii) process ICB Prior Sep 2008 HBWWT/2.2 equipment of WWTP, auxiliary equipment; and (iii) electrical and automatic ICB Prior Oct 2008 HBWWT/2.3 equipment, instruments, cables and lighting of the WWTP ICB Prior Aug 2009 HBWWT/2.4 NCB Post Sep 2009 HBWWT/2.5 ICB Prior H. Subproject: Jiamusi City East District WWTP + Effluent Reuse Civil Works JMSWWT/1.1 Construction of (i) pipeline and (ii) structures of the WWTP Aug 2008 Prior NCB JMSWWT/1.2 Jan 2008 Post M and E JMSWWT/2.1 Procurement of equipment for: (i) clarify room, biological aeration filter, chlorine Jan 2010 JMSWWT/2.2 dosing room and blower room of the WWTP; (ii) distribution pump room, water Feb 2010 JMSWWT/2.3 reuse lift pump station, clear water tank and sludge dewatering room of the NCB Post Feb 2010 JMSWWT/2.4 WWTP; (iii) electrical equipment of the WWTP; (iv) instruments and automatic Mar 2010 JMSWWT/2.5 control equipment of the WWTP; and (v) installation of equipment of the WWTP I. Subproject: Nenjiang County WWTP + Sewerage Network Civil Works NJWWT/1.1 Procurement and installation of: (i) D1800 interception pipe with a length of May 2009 Prior NJWWT/1.2 1,000 m; (ii) D800 interception pipe with a length of 5,700 m; and (iii) D300-800 NCB Jun 2009 Post NJWWT/1.3 interception pipe with a length of 5,040 m Jul 2009 Post J. Subproject: Qiqihar City WWTP (Phase II) Civil Works QQWWT/1.1 Construction of: (i) CASS tank; and (ii) coarse screen well, lift pump station, fine QQWWT/1.2 screen well, aeration grit chamber, sand removal room, primary sedimentation QQWWT/1.3 tank, contact tank, effluent pump station, blower room, sludge thickener, sludge Jun 2009 Post storage tank, sludge dewatering tank, chemical room, chlorine dosing room and NCB Jul 2009 Post storage room, power distribution room, administration building, plant drainage May 2009 Prior pump station, water supply system, warming system, lighting system and power input cable system. Earthworks, dam, concrete ground, road, etc. M and E QQWWT/2.1 Procurement, installation, and commission of: (i) electrical equipment; (ii) Post Mar 2010 QQWWT/2.2 automatic control system, instruments, PLC and communication devices; (iii) Post Dec 2009 QQWWT/2.3 pumps; (iv) screens, grit removal equipment, sludge scrapers and solid waste Post Dec 2009 QQWWT/2.4 transferring machine; (v) equipment of the CASS tank, including the fine bubble Post Jan 2010 QQWWT/2.5 diffusion aerator; (vi) equipment in the blower room; (vii) equipment in the sludge NCB Post Jan 2010 QQWWT/2.6 dewatering room, odor control room and chlorine room; (viii) gate valve, vales, Prior Jan 2010 QQWWT/2.7 reverse valves, compensators and hoists; and (ix) analyzing devices, office Post Feb 2010 QQWWT/2.8 equipment, transportation vehicle, and furniture Post Apr 2010 QQWWT/2.9 Post K. Subproject: Qitaihe City Effluent Reuse Civil Works QTHER/1.1 Construction of: (i) water regeneration room and administration building; (ii) clear Aug 2008 Prior QTHER/1.2 water tank, effluent pump station, and chlorine dosing room; and (iii) road and all Sep 2008 Post NCB QTHER/1.3 pipes. Installation and commissioning of process equipment and electrical Jan 2009 Post QTHER/1.4 equipment Jun 2009 Post M and E QTHER/2.1 Procurement of process equipment (pumps, motors, and valves) for the WTP; Apr 2009 NCB Post QTHER/2.2 and electrical equipment, automatic control equipment, and instruments May 2009 L. Subproject: Shuangyashan City WWTP Civil Works SYSWWT/1.1 Construction of the interception pipe and civil works of the WWTP July 2008 Prior NCB SYSWWT/1.2 Aug 2008 Post M and E SYSWWT/2.1 Procurement and installation of equipment of: (i) pump station; (ii) coarse screen Feb 2009 SYSWWT/2.2 room and lift pump station of the WWTP; (iii) fine screen room and Jones Oct 2009 SYSWWT/2.3 sedimentation tank of the WWTP; (iv) water distribution system and bio-reaction Oct 2009 NCB Post SYSWWT/2.4 tank of the WWTP; and (v) secondary sedimentation tank of the WWTP. Nov 2009 SYSWWT/2.5 Procurement of analyzing devices, office, transportation, and furniture of the Dec 2009 SYSWWT/2.6 WWTP Jan 2010 M. Subproject: Tangyuan County WWTP Civil Works TYWWT/1.1 Construction of: (i) PRP pipe (DN300–1,000) with a length of 13,417 m in the Feb 2009 Prior TYWWT/1.2 central district; (ii) PTP pipe (DN300–1,000) with a length of 4,522 m and Feb 2010 Post NCB TYWWT/1.3 channel (BXH: 400X600-1,200X 1,200) with a length of 2,713 m in Huasheng Apr 2009 Post TYWWT/1.4 District; (iii) structures of the WWTP The construction of pump station (No. 2 and Mar 2010 Post

46 Appendix 8

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review TYWWT/1.5 3); (iv) PTP pipe (DN300–900) with a length of 6,181 m in Sanzhong District; (v) Mar 2011 Post TYWWT/1.6 PTP pipe (DN300–1200) with a length of 12,740 m and channel (BXH: Apr 2011 Post 1,300X1,300) with a length of 700 m in Tiedong District; and (vi) PTP pipe (DN500–1200) with a length of 6,010 m, cast iron pipe (DN200–300) with a length of 1,700 m and channel (BXH: 1,200X1,100) with a length of 550 m in Tiedong District M and E TYWWT/2.1 Procurement and installation of: (i) mechanical equipment of the BAF of the TYWWT/2.2 WWTP; (ii) sloping plate settling tank and other auxiliary equipment of the Jan 2010 TYWWT/2.3 WWTP; (iii) equipment of coarse screen room, fine screen room, Jones grit Jan 2010 TYWWT/2.4 chamber, UV disinfection tank, sludge dewatering room, effluent lift pump NCB Feb 2010 Post TYWWT/2.5 station, electrical equipment, automatic control system and instruments of the Feb 2010 WWTP; and (iv) equipment of pump station (No. 2 and 3). Procurement of Mar 2010 analyzing devices, furniture, transportation vehicle, communication devices, maintenance equipment, and boiler N. Project Implementation Consultant QCBS/1.1 Procurement of all consulting service for subprojects in HLJ. NCB Oct. 2008 Prior JILIN PROVINCE A. Subproject: Dehui City WWTP Civil Works DHWWTP/1.1 Construction of all structures and installation of: (i) process equipment of the DHWWTP/1.2 WWTP, including civil works, installation of wastewater treatment equipment, Oct 2008 Post DHWWTP/1.3 automatic control equipment and electrical equipment and boiler; and (ii) earth NCB Sep 2008 Prior backfill, fence, ground work, road, pipes, greening and lighting. Procurement and Sep 2008 Post installation of PRP pipeline M and E DHWWTP /2.1 Procurement of (i) pumps, blowers, valves, activators, axial fans and hoists; (ii) Oct 2009 DHWWTP /2.2 electrical equipment, automatic control equipment and instruments; and (iii) NCB Nov 2009 Post DHWWTP /2.3 specific equipment: dewatering centrifuge, mixers, sludge scrapers, disinfection Oct 2009 equipment DHWWTP /2.4 Procurement of (i) transportation vehicle; (ii) analyzing devices, office equipment DHWWTP /2.5 and furniture; and (iii) boiler and other auxiliary equipment SH Dec 2009 Post DHWWTP /2.6 B. Subproject: Gongzhuling City Fanjiatun Town WWTP Civil Works GZLWWTP/1.1 Construction of: (i) structures and the installation of the boiler and auxiliary Oct 2008 Post GZLWWTP/1.2 equipment, electrical equipment and automatic control equipment of the WWTP; NCB Sep 2008 Prior GZLWWTP/1.3 and (ii) earth backfill, fence, ground work, road, pipes, greening and lighting. Sep 2008 Post Procurement and installation of PRP pipeline M and E GZLWWTP/2.1 Procurement of: (i) electrical equipment, automatic control equipment and GZLWWTP/2.2 instruments of the WWTP and pump station; and (ii) specific equipment: Dec 2009 NCB Post dewatering centrifuge, mixers, sludge scrapers, disinfection equipment. Nov 2009 equipment transport vehicles, and heating equipment GZLWWTP/2.3 Procurement of (i) transportation vehicle, and (ii) analyzing devices, office SH Jan 2010 GZLWWTP/2.4 equipment and furniture C. Subproject: Gongzhuling City Sewage Network Upgrade Civil Works GZLSNU/1.1 Construction of the pump station and installation of all process equipment, Sep 2008 Prior GZLSNU/1.2 electrical and automatic control equipment in the sewerage pipeline system. NCB Oct 2008 Post Procurement and installation of PRP pipeline. M and E GZLSNU/2.1 Procurement of: (i) equipment, includes pumps, blowers, vales, activators, axial NCB Dec 2009 Post GZLSNU/2.2 fans, hoists and screens; and (ii) electrical equipment of the pump station SH Jan 2010 D. Subproject: Fusong County WWTP Civil Works FSWWTP/1.1 Construction of: (i) structures and installation of all equipment of the WWTP; and Oct 2008 Post FSWWTP/1.2 (ii) earth backfill, fence, ground work, road, pipes, greening and lighting. NCB Sep 2008 Prior FSWWTP/1.3 Procurement and installation of PRP pipeline Sep 2008 Post M and E FSWWTP/2.1 Procurement of: (i) process equipment: pumps, blowers, valves, activators, axial Nov 2009 FSWWTP/2.2 fans, hoists, dewatering centrifuge, mixers, sludge scrapers, disinfection NCB Dec 2009 Post FSWWTP/2.3 equipment; (ii) electrical equipment, automatic control equipment and Jan 2010 instruments of the WWTP and pump station; and (iii) transportation vehicle FSWWTP/2.4 Procurement of (i) analyzing devices, office equipment and furniture, boiler and FSWWTP/2.5 auxiliary equipment; and (iii) maintenance equipment SH Feb 2010 Post FSWWTP/2.6 E. Subproject: Fuyu County WWTP Civil Works

Appendix 8 47

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review FYWWTP/1.1 Construction of: (i) structures and installation of all equipment of the WWTP; and Oct 2008 Post FYWWTP/1.2 (ii) earth backfill, fence, ground work, road, pipes, greening and lighting, access NCB Sep 2008 Post FYWWTP/1.3 road. Procurement and installation of PRP pipeline Sep 2008 Prior M and E FYWWTP/2.1 Procurement of: (i) process equipment: pumps, blowers, valves, activators, axial NCB Nov 2009 Post FYWWTP/2.2 fans, hoists; (ii) electrical equipment, automatic control equipment and NCB Dec 2009 Post FYWWTP/2.3 instruments of the WWTP and pump station; and (iii) process equipment: floating ICB Nov 2009 Prior FYWWTP/2.4 chain aerators, dewatering centrifuge, mixers, sludge scrapers, disinfection NCB Mar 2010 Post equipment. Procurement of transportation vehicle. FYWWTP/2.5 Procurement of (i) analyzing devices, office equipment and furniture, and (ii) SH Mar 2010 Post FYWWTP/2.6 boiler and auxiliary equipment F. Subproject: Jingyu County WWTP Civil Works JYWWTP/1.1 Construction of: (i) process structures and installation of all process equipment May 2009 Post JYWWTP/1.2 electrical equipment, automatic control equipment, boiler and auxiliary NCB Apr 2009 Post JYWWTP/1.3 equipment of the WWTP; and (ii) earth backfill, fence, ground work, road, pipes, Apr 2008 Prior greening and lighting. Procurement and installation of PRP pipeline M and E JYWWTP/2.1 Procurement of: (i) equipment: pumps, blowers, valves, activators, axial fans, Oct 2010 JYWWTP/2.2 hoists; (ii) electrical equipment , access electricity equipment, automatic control Nov 2010 JYWWTP/2.3 equipment and instruments of the WWTP; (iii) process equipment: dewatering NCB Post Oct 2010 JYWWTP/2.4 centrifuge, mixers, sludge scrapers, disinfection equipment; and (iv) Jan 2011 transportation vehicle JYWWTP/2.5 Procurement of (i) maintenance equipment, analyzing devices, communication Jan 2011 SH JYWWTP/2.6 devices, office equipment and furniture, and (ii) boiler and auxiliary equipment Feb 2011 G. Subproject: Liuhe County WWTP Civil Works LHWWTP/1.1 Construction of: (i) structures and installation of all equipment (including process Oct 2008 Post LHWWTP/1.2 equipment, electrical equipment and instruments) of the WWTP; and (ii) earth NCB Sep 2008 Prior LHWWTP/1.3 backfill, fence, ground work, road, pipes, greening and lighting and installation of Sep 2008 Post boiler and auxiliary equipment. Procurement and installation of PRP pipeline M and E JYWWTP/2.1 Procurement of: (i) equipment: pumps, blowers, valves, activators, axial fans, Oct 2009 Prior JYWWTP/2.2 hoists; (ii) electrical equipment, automatic control equipment and instruments of NCB Nov 2009 Post JYWWTP/2.3 the WWTP and pump station; and (iii) process equipment: dewatering centrifuge, Oct 2009 Post mixers, sludge scrapers, disinfection equipment. JYWWTP/2.4 Procurement of: (i) transportation vehicle, (ii) analyzing devices, office Feb 2010 JYWWTP/2.5 equipment, and furniture, and (iii) boiler and auxiliary equipment SH Feb 2010 Post JYWWTP/2.6 Mar 2010 H. Subproject: Tonghua County WWTP Civil Works THWWTP/1.1 Construction of: (i) structures and installation of all process equipment, electrical May 2009 Post THWWTP/1.2 equipment, automatic control equipment, boiler and auxiliary equipment of the NCB Apr 2009 Post THWWTP/1.3 WWTP; and (ii) earth backfill, fence, ground work, road, pipes, greening and Apr 2008 Prior lighting. Procurement and installation of PRP pipeline M and E THWWTP/2.1 Procurement of: (i) equipment: pumps, blowers, valves, activators, axial fans, Nov 2010 THWWTP/2.2 hoists; (ii) electrical equipment, automatic control equipment and instruments of NCB Dec 2010 Post THWWTP/2.3 the WWTP and access electricity equipment; (iii) process equipment: dewatering Nov 2010 centrifuge, mixers, sludge scrapers, disinfection equipment. THWWTP/2.4 Procurement of (i) transportation vehicle; (ii) maintenance equipment, analyzing Jan 2011 THWWTP/2.5 devices, communication devices, office equipment and furniture; and (iii) boiler SH Jan 2011 Post THWWTP/2.6 and auxiliary equipment Feb 2011 I. Subproject: Yushu City WWTP Civil Works YSWWTP/1.1 Construction of: (i) process structures and installation of all process equipment Nov 2008 Post YSWWTP/1.2 of the WWTP; (ii) auxiliary buildings and installation of all auxiliary equipment of Nov 2008 Post YSWWTP/1.3 the WWTP (including the boiler); and (iii) earth backfill, fence, ground work, road, NCB Oct 2008 Prior YSWWTP/1.4 pipes, greening and lighting. Procurement and installation of PRP pipeline, Oct 2008 Post construction and installation of equipment of pump station M and E YSWWTP/2.1 Procurement of: (i) process equipment: pumps, blowers, valves, activators, axial YSWWTP/2.2 fans, hoists; (ii) electrical equipment, automatic control equipment and Feb 2010 YSWWTP/2.3 instruments of the WWTP and pump station; and (iii) process equipment: floating NCB Mar 2010 Post chain aerators, dewatering centrifuge, mixers, sludge scrapers, disinfection Feb 2010 equipment YSWWTP/2.4 Procurement of (i) transportation vehicle; (ii) analyzing devices, office equipment YSWWTP/2.5 and furniture; and (iii) boiler and auxiliary equipment SH Apr 2010 Post YSWWTP/2.6

48 Appendix 8

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review J. Subproject: Da’an City Sanitary Landfill Civil Works DASWM/1.1 Construction of: (i) landfill , structures, auxiliary buildings, including DASWM/1.2 administration building, boiler room, leachate treatment plant of the landfill and DASWM/1.3 installation of liner, boiler and auxiliary equipment and all equipment of the May 2009 Post DASWM/1.4 leachate treatment plant, including biological treatment equipment, ultra filtration Apr 2009 Prior equipment, nano-filtration equipment, sludge treatment equipment and electrical NCB Jun 2009 Post control equipment; (ii) earth backfill, fence, ground work, road, pipes, greening Apr 2009 Post and lighting; and (iii) rubbish collection center and installation and commission of equipment of solid waste collection center and dumpster. Disposal of the rubbish on the flood plain of Nenjiang River M and E DASWM/2.1 Procurement of: (i) liner of the landfill; (ii) general equipment of the landfill, DASWM/2.2 including but not limited to rubbish trucks, roller, loader and bulldozer; (iii) Jan 2011 DASWM/2.3 equipment of the leachate treatment plant, including but not limited to biological Feb 2013 NCB Post DASWM/2.6 treatment equipment, ultra filtration equipment, nano-filtration equipment, sludge May 2012 treatment equipment, and electrical control equipment; and (iv) equipment of the Jun 2012 rubbish collection center and dumpster DASWM/2.4 Procurement of (i) analyzing devices, office equipment and furniture; and (ii) SH Jun 2012 Post DASWM/2.5 boiler and auxiliary equipment K. Subproject: Fusong County Sanitary Landfill Civil Works FSSWM/1.1 Construction of: (i) structures of the landfill, including but not limited to dam, FSSWM/1.2 flood intercepting trench, water dam, equalization tank, water storage tank, Apr 2009 Prior FSSWM/1.3 monitoring well, concrete opening area among utilizes, gas guiding pipe, NCB May 2009 Post leachate guiding layer and underground water guiding layer; (ii) rubbish transfer May 2009 Post center with compressing; and (iii) structures of the employee living zone and leachate treatment plant M and E FSSWM/2.1 Procurement of: (i) rubbish trucks and auxiliary equipment of the landfill; (ii) FSSWM/2.2 machines including roller, bulldozer and loader; (iii) equipment of the leachate FSSWM/2.3 treatment plant, including but not limited to biological treatment equipment, Jan 2012 FSSWM/2.4 nano-filtration equipment, electrical equipment and instruments; (iv) liners, Feb 2012 FSSWM/2.5 unweaving cloth, bentonite blanket, leachate and gas guiding pipes of zones No. Jan 2012 FSSWM/2.7 1 and 2 of the landfill; (v) liners, unweaving cloth, bentonite blanket, leachate NCB Dec 2010 Post FSSWM/2.6 and gas guiding pipes of zones No. 3, 4 and 5 of the landfill; and (vi) rubbish Dec 2011 truck and rubbish dumpster for rubbish transportation, including rubbish truck, Mar 2012 container, pallet truck, and dump truck . Procurement and installation of Jan 2011 equipment of the rubbish transfer center, including roller, chute, monitoring equipment, odor control equipment, and balancer. L. Subproject: Huadian City Sanitary Landfill Civil Works HDSWM/1.1 Construction of: (i) main structures of the landfill; (ii) auxiliary structures and HDSWM/1.2 installation of all equipment of the landfill, including but not limited to May 2009 Post HDSWM/1.3 construction and installation of administrative building, boiler room and leachate NCB Jun 2009 Post treatment plant, installation of electrical equipment, automatic control equipment Apr 2009 Prior and instruments; and (iii) earth backfill, fence, ground work, road, pipes, greening, and lighting. M and E HDSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; (ii) NCB Nov 2010 HDSWM/2.2 machines including rubbish truck, roller, loader and bulldozer; (iii) electrical NCB May 2013 HDSWM/2.3 equipment, automatic control equipment and instruments of the leachate NCB Dec 2011 HDSWM/2.4 treatment plant and pump station; (iv) process equipment: dewatering centrifuge, Post NCB Oct 2011 HDSWM/2.5 mixers, sludge scrapers, disinfection equipment of the leachate treatment plant; NCB Jan 2012 HDSWM/2.6 (v) analyzing devices, office equipment and furniture; and (vi) boiler and SH Feb 2012 auxiliary equipment M. Subproject: Huinan County Sanitary Landfill Civil Works HNSWM/1.1 Construction of: (i) main structures of the landfill; (ii) auxiliary structures and Apr 2009 Prior HNSWM/1.2 installation of all equipment of the landfill, including but not limited to NCB May 2009 Post HNSWM/1.3 construction of administrative building, boiler room and equalization tank; and Apr 2009 Post (iii) earth backfill, fence, ground work, road, pipes, greening and lighting M and E HNSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; and (ii) Jan 2010 NCB Post HNSWM/2.2 machines including rubbish truck, roller, loader, and bulldozer Mar 2012 HNSWM/2.3 Procurement of (i) electrical equipment, automatic control equipment, and Jan 2012 HNSWM/2.4 instrument of the leachate treatment plant and pump station; and (ii) analyzing SH Post Feb 2012 devices, office equipment and furniture

Appendix 8 49

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review N. Subproject: Jiaohe City Sanitary Landfill Civil Works JHSWM/1.1 Construction of: (i) main structures auxiliary structures of the landfill, including JHSWM/1.2 but not limited to liners, and installation of all equipment of the landfill, including July 2009 Post but not limited to construction of administrative building, boiler room and NCB Jun 2009 Prior leachate treatment; and (ii) earth backfill, fence, ground work, road, pipes, greening, and lighting M and E JHSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; (ii) Oct 2010 JHSWM/2.2 process equipment of the leachate treatment plant; (iii) electrical equipment, Mar 2012 JHSWM/2.3 automatic control equipment, and instruments of the leachate treatment plant NCB Apr 2012 Post JHSWM/2.4 and pump station; (iv) general equipment, including rubbish truck, roller, loader Apr 2013 JHSWM/2.5 and bulldozer; and (v) analyzing devices and other auxiliary equipment May 2013 O. Subproject: Jingyu County Sanitary Landfill Civil Works JYSWM/1.1 Construction of: (i) structures of the landfill, including but not limited to main JYSWM/1.2 structures and liners and installation of all equipment of the landfill, including but May 2009 Post not limited to construction of administrative building, boiler room and leachate NCB Apr 2009 Prior treatment plant, installation of the boiler; and (ii) earth backfill, fence, ground work, road, pipes, greening, and lighting M and E JYSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; (ii) Jan 2011 JYSWM/2.2 general equipment, including rubbish truck, roller, loader and bulldozer; and (iii) NCB Dec 2012 Post JYSWM/2.4 process equipment of the leachate treatment plant Feb 2012 JYSWM/2.3 Procurement of (i) electrical equipment, automatic control equipment and Jan 2012 JYSWM/2.5 instruments of the leachate treatment plant and pump station; (ii) analyzing SH Mar 2012 JYSWM/2.6 devices and other auxiliary equipment; and (iii) boiler and auxiliary equipment Mar 2012 P. Subproject: Liuhe County Sanitary Landfill Civil Works LHSWM/1.1 Construction of: (i) main structures and installation of all main equipment of the LHSWM/1.2 landfill, including but not limited to administration building, boiler room, power distribution room and leachate treatment plant; and (ii) auxiliary structures and Jun 2009 Post NCB installation of auxiliary equipment of the landfill, including but not limited to May 2009 Prior earth backfill, ground work, transfer center, fence, road, pipes, greening and lighting M and E LHSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill (ii) Dec 2010 LHSWM/2.2 general equipment, including rubbish truck, roller, loader and bulldozer; and (iii) NCB Dec 2012 Post LHSWM/2.5 process equipment of the leachate treatment plant Feb 2012 LHSWM/2.3 Procurement of (i) electrical equipment of the leachate treatment plant and pump Mar 2012 LHSWM/2.4 station, (ii) automatic control equipment and instruments of the leachate Jan 2013 SH LHSWM/2.6 treatment plant and pump station, (iii) office devices and furniture, and (iv) boiler Apr 2012 LHSWM/2.7 and auxiliary equipment Feb 2013 Q. Subproject: Meihekou City Sanitary Landfill Civil Works MHKSWM/1.1 Construction of: (i) earth backfill, access road and installation of pipes and May 2009 Prior MHKSWM/1.2 outdoor auxiliary equipment; and (ii) main structures and structures of the NCB Jun 2009 Post leachate treatment plant M and E MHKSWM/2.1 NCB Nov 2010 Post MHKSWM/2.2 Procurement of: (i) liners material and auxiliary equipment of the landfill, (ii) NCB Apr 2012 Post MHKSWM/2.3 process equipment of the landfill and the leachate treatment plant, (iii) ICB Apr 2013 Prior MHKSWM/2.4 transportation vehicles, and (iv) analyzing devices and maintenance equipment SH Apr 2013 Post R. Subproject: Tongyu County Sanitary Landfill Civil Works TYSWM/1.1 Construction of: (i) main structures of the landfill; (ii) auxiliary structures and TYSWM/1.2 installation of all equipment of the landfill, including but not limited to Jul 2009 Post TYSWM/1.3 construction and installation of administrative building, boiler room and leachate NCB Jul 2009 Post treatment plant, installation of electrical equipment, automatic control equipment Jun 2009 Prior and instruments; and (iii) earth backfill, fence, ground work, road, pipes, greening and lighting. M and E TYSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; (ii) Nov 2010 TYSWM/2.2 general equipment, including rubbish truck, roller, loader, and bulldozer; and (iii) NCB Feb 2013 Post TYSWM/2.3 equipment of the leachate treatment plant Jun 2012 TYSWM/2.4 Procurement of (i) analyzing devices, office equipment and furniture; (ii) Dec 2012 TYSWM/2.5 electrical equipment, automatic control equipment, instruments, boiler and SH Jan 2013 TYSWM/2.6 auxiliary equipment; and (iii) boiler and auxiliary equipment Jan 2013

50 Appendix 8

Expected Date Procurement of ADB Contract No. Contract Description Method Advertisement Review S. Subproject: Yushu City Sanitary Landfill Civil Works YSSWM/1.1 Construction of all structures of the landfill and installation of all equipment of YSSWM/1.2 the landfill, including but not limited to construction and installation of May 2009 Post administrative building, boiler room and leachate treatment plant, installation of NCB Apr 2009 Prior electrical equipment, automatic control equipment and instruments. Construction of all earth backfill, fence, ground work, road, pipes, greening, and lighting M and E YSSWM/2.1 Procurement of: (i) liners material and auxiliary equipment of the landfill; (ii) YSSWM/2.2 general equipment, including rubbish truck, roller, loader and bulldozer; (iii) Nov 2010 YSSWM/2.3 electrical equipment, automatic control equipment and instruments of the NCB Apr 2013 Post YSSWM/2.4 leachate treatment plant and pump station; and (iv) process equipment of the Sep 2012 leachate treatment plant YSSWM/2.5 Procurement of (i) analyzing devices, office equipment and furniture; and (ii) SH Oct 2012 YSSWM/2.6 boiler and auxiliary equipment T. Subproject: Changbaishan Mountain Administrative Committee WWTP/Civil Works CBSWWTP/1.1 Construction of: (i) structures and installation of all equipment of the WWTP; (ii) May 2009 Post CBSWWTP/1.2 access road; and (iii) earth backfill, fence, ground work, road, pipes, greening Apr 2009 Prior NCB CBSWWTP/1.3 and lighting. Procurement and installation of PRP pipeline Jun 2009 Post CBSWWTP/1.4 Apr 2009 Post WWTP/M & E CBSWWTP/2.1 Procurement of: (i) process equipment: pumps, blowers, valves, activators, axial Nov 2009 CBSWWTP/2.2 fans, hoists; (ii) electrical equipment, automatic control equipment and Dec 2009 CBSWWTP/2.3 instruments of the WWTP; (iii) process equipment: floating chain aerators, NCB Post Nov 2009 CBSWWTP/2.4 dewatering centrifuge, mixers, sludge scrapers, disinfection equipment; and (iv) Jan 2010 transportation vehicle CBSWWTP/2.5 Procurement of analyzing devices, office equipment and furniture SH Feb 2010 Landfill/Civil Works CBSSWM/1.1 Construction of the rubbish transfer center NCB May 2009 Post Landfill/M & E CBSSWM/2.1 Procurement of all general equipment, including rubbish truck, roller, loader and NCB Dec 2012 Post bulldozer. Q. Project Implementation Consultant QCBS/1.2 Procurement of all consultation service for subprojects in Jilin NCB Oct. 2008 Prior

ADB = Asian Development Bank, BAF = biological aerated filter, CASS = cyclic activated sludge system, DIP = ductile iron pipe, ICB = international competitive bidding, m = meter, M & E = mechanical and electrical, NCB = national competitive bidding, QCBS = quality- and cost-based selection, SH = shopping, UV = ultraviolet, WTP = water treatment plant, WWTP = wastewater treatment plant. Sources: Heilongjiang and Jilin project management offices.

Appendix 8 51

A. National Competitive Bidding

The Borrower’s Law of Tendering and Bidding of the People’s Republic of China promulgated by Order No. 21 of the President of the PRC on 30 August 1999, are subject to the following clarifications required for compliance with the Guidelines:

(i) All invitations to prequalify or to bid shall be advertised in the national press, or official gazette, or a free and open access website in the Borrower’s country. Such advertisement shall be made in sufficient time for prospective bidders to obtain prequalification or bidding documents and prepare and submit their responses. In any event, a minimum preparation period of thirty (30) days shall be given. The preparation period shall count (a) from the date of advertisement, or (b) when the documents are available for issue, whichever date is later. The advertisement and the prequalification and bidding documents shall specify the deadline for such submission.

(ii) Qualification requirements of bidders and the method of evaluating the qualification of each bidder shall be specified in detail in the bidding documents, and in the prequalification documents if the bidding is preceded by a prequalification process.

(iii) If bidding is preceded by a prequalification process, all bidders that meet the qualification criteria set out in the prequalification document shall be allowed to bid and there shall be no limit on the number of pre-qualified bidders.

(iv) All bidders shall be required to provide a performance security in an amount sufficient to protect the Borrower/Project Executing Agency in case of breach of contract by the contractor, and the bidding documents shall specify the required form and amount of such performance security.

(v) Bidders shall be allowed to submit bids by mail or by hand.

(vi) All bids shall be opened in public; all bidders shall be afforded an opportunity to be present (either in person or through their representatives) at the time of bid opening, but bidders shall not be required to be present at the bid opening.

(vii) All bid evaluation criteria shall be disclosed in the bidding documents and quantified in monetary terns or expressed in the form of pass/fail requirements.

(viii) No bid may be rejected solely on the basis that the bid price falls outside any standard contract estimate, or margin or bracket of average bids established by the Borrower/Project Executing Agency.

(ix) Each contract shall be awarded to the lowest evaluated responsive bidder, that is, the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (a) to be substantially responsive to the bidding documents and (b) to offer the lowest evaluated cost. The winning bidder shall not be required, as a condition of award, to undertake responsibilities for work not stipulated in the bidding documents or otherwise to modify the bid as originally submitted.

52 Appendix 8

(x) Each contract financed with the proceeds of the Loan shall provide that the suppliers and contractors shall permit ADB, at its request, to inspect their accounts and records relating to the performance of the contract and to have said accounts and records audited by auditors appointed by ADB.

(xi) Government owned enterprises in the Borrower’s country may be permitted to bid if they can establish that they (a) are legally and financially autonomous, (b) operate under commercial law and (c) are not a dependent agency of the Borrower/Project Executing Agency.

(xii) Re-bidding shall not be allowed solely because the number of bids is less than three (3).

Appendix 9 53

SUMMARY RESETTLEMENT PLAN

A. Introduction

1. The Songhua River Basin Water Pollution Control and Management Project comprises 33 water supply, wastewater management, solid waste management (SWM), and integrated river improvement subprojects in 11 counties or cities of Heilongjiang and 15 counties or cities of Jilin province. The construction of the Project will have significant land acquisition and resettlement impacts. The implementing agencies (IAs) with the support of the respective design institutes prepared five short resettlement plans, two due diligence reports, and six statements of land acquisition and resettlement (LAR)1 for the Heilongjiang component. Three full and 13 short resettlement plans (one of which had a due diligence report) were prepared for the subcomponents for Jilin component. The primary objective of the resettlement plans has been to ensure that the affected people improve their living standards or are at least not made worse off because of the Project.

B. Land Acquisition and Resettlement Impacts

2. The construction of the Songhua River Basin Water Pollution Control and Management Project will affect 287 households or 1,523 persons by permanent land acquisition and 331 households or 1,067 persons by temporary land occupation. The residential and nonresidential houses of 68 households or 238 persons will be demolished. In total, 272.6 hectares (ha) of land will be affected permanently, 33% of which (90.2 ha) is cultivated land; 125.5 ha of rural collective and state land will be occupied temporarily; and 11,180.6 m2 of residential and nonresidential structures will be demolished.

Table A9.1: Summary Land Acquisition and Resettlement Impacts Total Area Of which Affected Affected Type of Impact (ha/m2) Farmland (ha) Households (no.) Persons (no.) A. Heilongjiang Province Permanent Land Acquisition (ha) 68.0 27.5 41 149 Temporary Land Acquisition (ha) 54.7 7.9 162 529 House Demolition (m2) 2,035.6 0.0 14 51 Subtotal (A) 208 687 B. Jilin Province Permanent Land Acquisition (ha) 204.6 62.7 246 1,374 Temporary Land Acquisition (ha) 70.8 22.2 169 538 House Demolition (m2) 9,144.9 0.0 54 187 Subtotal (B) 458 2,065 Total (A + B) Permanent Land Acquisition (ha) 272.6 90.2 287 1,523 Temporary Land Acquisition (ha) 125.5 30.1 331 1,067 House Demolition (m2) 11,180.6 0.0 68 238 ha = hectare, m2 = square meter, no. = number. Source: Asian Development Bank.

3. For the Heilongjiang component, the subcomponents will affect 41 households or 149 persons by permanent land acquisition and 162 households or 529 persons by temporary land occupation. The demolition of residential structures will lead to the relocation of 14 households or 51 persons. In total, 68 ha of land will be affected permanently, 40.4% of which is cultivated land; 54.7 ha of rural and state land will be occupied temporarily; and 2,035.6 m2 of residential

1 Statements here refer to the subcomponents that involve state-owned land to be acquired. They do not include land owned by village committees or farmers’ households that are affected.

54 Appendix 9 houses will be demolished. For the Jilin component, the construction of the proposed subprojects will affect 246 households or 1,374 persons by permanent land acquisition and 169 households or 538 persons by temporary land occupation. Demolition of buildings, including two enterprises and two shops, will require the relocation of 54 households or 187 persons. Of the total affected persons, 10 households or 19 persons are from vulnerable groups. In total, 204.6 ha of land will be affected permanently, of which 30.6% is cultivated land; 70.8 ha of rural collective and state land will be occupied temporarily, including 31.5% of cultivated land; and 9,145 m2 of houses will be demolished. In addition, associated productive assets, ground attachments, and basic infrastructures and facilities will be affected as result of both the Heilongjiang and Jilin components. In order to avoid or minimize land acquisition and resettlement, there was close consultation with the local officials and village committees and street committees during the preliminary and final feasibility study, and during the preliminary design stages.

C. Policy and Legal Framework

4. Compensation for permanent land loss is based on the Land Administration Law of the PRC (1998) and the State Council Decision to Deepen Reform and Strictly Enforce Land Administration (Document 28 dated in November 2004). Compensation for house demolition is based on the Provincial and Municipal Urban Housing Demolishment Administration Regulations. The resettlement plans comply with PRC laws and regulation of resettlement and ADB’s Involuntary Resettlement Policy (1995). Based on consultations with local governments and those affected, and general practice in relevant counties or cities, a set of compensation standards was adopted by the respective county or city project management offices (PMOs) and IAs. The resettlement principles established for the Project are (i) land acquisition and involuntary resettlement should be avoided or minimized where feasible by using alternative designs; (ii) compensation and entitlements are based on replacement value and must be sufficient to allow those affected to at least maintain their pre-project standard of living, with the prospect of improvement; (iii) the amount of land temporarily occupied and the period for disruption are to be kept to a minimum; (iv) all the people affected, legal and illegal, are to be taken into consideration and accounted for; (v) the per capita landholding after land acquisition should be sufficient to maintain previous livelihood standards; (vi) where land allocation per capita is not sufficient to maintain the previous livelihood standards, other income-generating activities will be provided for; (vii) a preferential policy will be provided to vulnerable groups with regard to compensation, payment of special fund, minimum living guarantee, and employment; (viii) all those affected will be adequately informed about eligibility, compensation rates and standards, livelihood and income restoration plans, and project timing; and (ix) close monitoring and timely actions will be carried out to identify and resolve any problems.

D. Compensation, Income, and Livelihood Restoration Scheme

5. For land acquisition, land compensation will be paid in cash to the affected villages to be used for improving village infrastructure and farming conditions. A resettlement subsidy and standing crops will be paid to the affected persons. For residential houses and nonresidential (enterprises and shops) houses to be demolished, compensation will be paid to owners, including those without house certificates. The payment will be made in cash according to the appraised value of the property. Households that have to relocate will also receive a relocation allowance. Compensation for standing crops, auxiliaries, and other assets will also be paid directly to the affected persons. Income losses resulting from reduced production sales and wages caused by the Project will be compensated in cash.

Appendix 9 55

6. The resettlement strategy encompasses (i) the replacement of housing, and (ii) the restoration of livelihoods and income. For people losing housing in rural areas, there are two resettlement options—to receive cash compensation or cash compensation plus provision of house plot for house construction by themselves. Assistance will be provided to enable affected persons to construct new houses or find available housing close to their original homes, if that is their preference. The respective county or city PMOs, IAs and local governments will provide assistance for house construction and relocation during resettlement implementation.

7. The measures for economic rehabilitation include: (i) provision of employment opportunities during construction and operational phases; (ii) provision of basic social insurance to affected persons whose land is newly acquired; (iii) development of economic crops with higher economic value; (iv) promotion and development of new enterprises and self-employed secondary and tertiary businesses (e.g., auto accessory manufacturing plants, community services, hairdressing salons, dry-cleaning businesses, small-scale supermarkets, transportation, entertainment and catering services); and (v) provision of technical training to the affected persons to increase their skills.

8. The survey results indicate that nine households and 28 persons are vulnerable people affected by construction of four subprojects in Jilin Province. For these vulnerable people, the respective municipal PMOs and IAs will establish a special assistance one-time payment of CNY2,000 per capita for them to improve their living standards. In addition, the vulnerable households will be provided with additional assistance for their relocation and rehabilitation. The PMO and IA will supervise implementation to ensure these vulnerable persons receive adequate compensation, housing arrangements, special assistance payments and livelihood arrangements, and assistance to restore their living conditions and incomes.

E. Information Disclosure, Participation, and Grievance Procedures

9. The people affected were notified about the key elements of the resettlement plan before ADB loan fact-finding. On various occasions during meetings, interviews, focus group discussions, public consultation workshops, and community consultation meetings, local representatives and affected persons have participated in the planning process and their concerns have been integrated into the resettlement plans. The resettlement information booklet for each subproject has been distributed to affected villages and households. The final resettlement plans have been provided to village offices and resident committees and posted on the ADB website on 28 July 2008. The project IAs will establish project resettlement units to supervise implementation, continuing public consultation, monitoring progress and responding to grievances. The grievance address procedures are well established and explanations are included in the resettlement information booklets.

F. Institutional Arrangement and implementation Schedule

10. Each PMO will have at least one person and each IA will have at least two full-time staff responsible for land acquisition and resettlement. Staff from each subproject resettlement unit will take the lead in coordinating the planning, implementation, financing, and monitoring of land acquisition and resettlement. They will work closely with village officials, land resource bureaus and house demolition administration offices, and will be responsible for supervision and monitoring of resettlement (e.g., delivery of entitlements, selection of new housing sites, restoration of incomes, provision of replacement land and other economic measures). A training program will be organized for the resettlement officers.

56 Appendix 9

G. Budget

11. The total costs for the LAR are estimated at CNY238.1 million ($34 million), including a contingency. Of the total LAR costs, CNY46.0 million ($6.6 million) is for the Heilongjiang component and CNY192.1 million ($27.4 million) for the Jilin component. The estimated costs include compensation for permanent land acquisition, temporary land occupation, demolition of residential houses and auxiliaries, relocation allowance, basic infrastructure and special facilities, land-related taxes, training, monitoring and evaluation, contingency and other costs. Resettlement implementation will precede construction schedules. Most resettlement activities will occur between February 2008 and December 2009. Resettlement implementation will be completed before subproject construction. Detailed measurement surveys will be conducted in each village, neighborhood, enterprise, and shop, and the compensation contracts will be negotiated and signed with village committees, households and enterprises. Based on these surveys, the resettlement plans will be updated and submitted to ADB for review and approval before commencement of construction activities if there are changes to the scope of the LAR or policies.

H. Monitoring and Supervision

12. Internal and external monitoring of resettlement plan implementation will be conducted. Monitoring methodologies are specified in the resettlement plans. Internal supervision and monitoring will be done by each IA to ensure compliance with the provisions of the resettlement plan. The PMO and IAs have agreed to a set of supervision milestones with ADB, to ensure timely and effective implementation of resettlement activities. External monitoring and evaluation will be carried out by an independent agency under contract to the PMO of Heilongjiang and Jilin province. Monitoring and evaluation reports will be prepared every 6 months during implementation and annually for 2 years after the completion of resettlement. External monitoring reports will be forwarded directly to the PMOs, IAs, and ADB and will be uploaded on ADB website.

Appendix 10 57

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: People’s Republic of China: Songhua River Basin Water Pollution Control and Management Project

Lending/Financing Department/ East Asia Department, Social Project Loan Modality: Division: Sectors Division

I. POVERTY ANALYSIS AND STRATEGY A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy

The Songhua River is a crucial watershed and priority development and environmental zone for the People’s Republic of China (PRC) Government, as noted in the 11th Five Year Plan (FYP). The Songhua River Basin Water Pollution Control and Management Project (SRBWPCMP) will improve environmental quality in the SRB and enhance the quality of life for 9.94 million people in the participating counties and cities of Heilongjiang and Jilin provinces. The Project is consistent with the Asian Development Bank’s (ADB) water policy. It will help the PRC achieve the Millennium Development Goal (MDG) of environmental sustainability (MDG Goal 7), and specifically address MDG Target 10 (to halve the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015). The Project is in line with ADB’s country partnership strategy in the PRC to make markets work more efficiently through (i) urban infrastructure development, (ii) promotion of environmental sustainability, and (iii) pro-poor equitable and inclusive growth. The Project is consistent with the Government’s priorities in the 11th FYP of addressing environmental issues including water and air pollution.

The SRB is the third largest river basin in the PRC after the Yangtze and Yellow Rivers. It has a catchment area of 556,800 square kilometers (km2) and serves a population of approximately 62 million. The urbanization rate for the area is relatively high, with 50% of the population living in counties and cities of SRB. The SRBWPCMP will improve water pollution control and drinking water sources in the SRB through the provision of clean and stable water supplies, wastewater and solid waste management and integrated river rehabilitation. It will upgrade the urban environment in the project counties and cities of Heilongjiang and Jilin provinces. In turn, it will also provide an enabling environment for poverty reduction directly and indirectly in the project areas by promoting: (i) improved urban environmental conditions and enhanced sanitation through pollution control in the SRB; (ii) increased employment and income generation opportunities, including temporary job creation during the construction phase and permanent job creation during the operational phase; (iii) increased environmental awareness and public hygiene; (iv) reduction in the incidence of water-, vector- and air-borne diseases, with associated reductions in medical costs, and in the number of workdays and school days lost; (v) increased yields and values of irrigated crops, fishery and animal husbandry; (vi) reduced risks of pollution to downstream water users; (vii) value-added benefits from using local procurement to the extent possible; (viii) improved investment conditions to stimulate the development of local economy, create new jobs and income generating opportunities and accelerate the rehabilitation of the ecological system of the Project counties and cities; (ix) accelerated development of the tourism industry in the project counties and cities; (x) increased land and property values for local residents in the Project areas; and, (xi) provision of low-cost water for industrial uses which in turn could reduce the price of associated products.

Environmental and socioeconomic benefits will accrue to the local populations in the SRB, thus enhancing their quality of life and health. Benefits will be felt especially by the poor who are most vulnerable to environment-related diseases and poor urban environments. Vulnerable populations and women will be particularly targeted for employment opportunities generated by the project investments. The Project will complement the PRC’s efforts to ensure environmental sustainability and reduce urban poverty. B. Poverty Analysis Targeting Classification: Targeted intervention (M7 T10) 1. Key Issues The Project is classified as MDG-TI. It directly addresses MDG 7 to ensure environmental sustainability and particularly Target 10 to halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation. It will benefit more than 9.94 million urban residents in the project areas of SRB, of whom 6.85% or 680,890 persons are poor and currently living under the minimum living guarantee (MLG) which ranges from CNY145 to CNY245 per capita per month in Heilongjiang Province and from CNY100 to CNY143 per capita per month in Jilin Province. The social analysis revealed that these poor are mostly living in areas without running water supplies, wastewater and solid waste collection and treatment services. They often suffer from serious water supply shortages, poor water quality, wastewater pollution, and poor urban environmental sanitation. They have less capacity to cope with the pollution and degraded environments and in turn suffer from increased exposure and risks to surface and ground water and air pollution, which further add to their poverty.

58 Appendix 10

Through the provision of clean and stable water supply and wastewater management, solid waste management, and integrated river rehabilitation components in the project counties and cities, the Project will improve the living environment and health status of the local urban residents. The Project is consistent with the Government’s priorities in the 11th FYP of addressing environmental issues, including water and air pollution. The poor who are most vulnerable to environment-related diseases and poor urban environments and lack of financial resources will receive environmental and socioeconomic benefits from the Project. They will particularly benefit from the targeted employment opportunities. 2. Design Features The designs for all subprojects have attempted to reduce impacts on land acquisition and resettlement. The resettlement plans, in consultation with local communities, have outlined and agreed upon the mitigation plans. Project assurances ensure targets for employment of local labor, especially the poor, women, and ethnic minorities (20%). The Social Action Plans (SAPs) outline strategies for mitigating adverse impacts and promoting positive benefits such as employment, initiating community-based environmental and hygiene awareness programs and ensuring HIV/AIDS awareness training is carried out by contractors. II. SOCIAL ANALYSIS AND STRATEGY A. Findings of Social Analysis The Project will directly benefit more than 9.94 million urban residents in the project areas of the SRB (including 7.04 million urban residents in the direct project area (DPA) of Heilongjiang province and 2.9 million urban residents in the DPA of Jilin province). Of the total beneficiary populations, about 48% are women, 6.85% (4.62% in Heilongjiang Province, and 12.24% in Jilin Province) are classified as poor based on the weighted average local urban poverty line of CNY183 per month, and 4.1% are members of ethnic minorities scattered across the project counties and cities.

Health Benefits. The implementation of the Project will lead to an improvement in the clean water supply and in wastewater and solid waste collection and treatment. It will contribute to a reduction in morbidity and mortality rates from water-, vector- and airborne diseases and contribute to savings in associated medical costs and the loss of healthy working days. Health is often both a cause and a result of poverty. Health sector studies in the PRC have shown that infectious and parasitic diseases particularly afflict the poor. The poorest quintile suffers three times the infectious disease rate of the wealthiest quartile. As the poor are often elderly and disabled, they are more susceptible to diseases and have less financial capability to cope with the costs associated with them. A public environment and hygiene awareness program in parallel with the existing environment and health programmes and close coordination with the environmental protection bureaus and health bureaus in the project counties and cities will be carried out during the implementation of the Project.

Employment Benefits. The Project will create 6,620 person-years of direct short-term employment during the construction phase and 1,380 direct long-term jobs during the operation phase. Based on discussions with the implementing agencies (IAs), it has been agreed that, of the total employment generated, a target of 30% short-term employment opportunities will be filled by the poor and minorities (15%) and women (15%) during the construction phase (earning CNY26.74 million) and long-term employment opportunities during the operation phase (earning CNY5.52 million) will be adopted. These jobs are most likely to be filled by currently laid-off or unemployed persons, meaning that the poor will particularly benefit from this job creation.

Affordability. The affordability assessment indicates that the average households and households in the lowest income class will not be adversely affected by the tariff increase since the share of income expended on the service is below 5% of their total income. The impact on households in the lowest income bracket can be potentially significant but will be mitigated through the existing tariff reduction and subsidy program. These subsidies are in addition to the minimum living guarantee. The results of the focus group discussion for the poor groups indicate that the poor households support the improved services if they can afford the tariff increase.

Ethnic Minorities. Ethnic minorities represent a small percentage of the total population (4.1%) and are scattered across the project counties and cities. The social analysis determined that they are socially and economically integrated with the majority population and will not be subject to any adverse impacts of the Project as a result of their minority status, including land acquisition and resettlement. Priority will be given to them for employment.

In addition, improved health and quality of life will improve the human capital and promote local economic development. The current loss of agricultural, fishery and animal husbandry production and lower prices of agricultural, fishery and animal husbandry products can be mitigated through the improved quality of water. The improved water quality and urban environment will promote sustainable economic development and accelerate the development of tourism. The poor and women are particularly likely to find opportunities in this industry.

Appendix 10 59

B. Consultation and Participation 1. The technical assistance (TA) used various participatory methods for poverty and social impact assessment, including a random sampling socioeconomic survey of 1,000 respondents in both Heilongjiang and Jilin provinces, stakeholder consultation workshops, meetings, seminars, focus group discussions, and key informant interviews on issues related to prevention and control of water supply, wastewater management, solid waste management, and integrated river rehabilitation subcomponents. Development of the summary environmental impact assessment (SEIA) and environmental management plan (EMP) involved two rounds of public consultation. Separate socioeconomic surveys, community meetings, opinion surveys and specific impact studies were conducted for the resettlement plans. The EMP and resettlement plans set out detailed ongoing public participation plans.

2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment

3. Was a C&P plan prepared? Yes No Public disclosure of all project documents at the PMO and on the ADB website including the project information document (PID), design and monitoring framework (DMF), resettlement plans, SEIA, report and recommendation of the President (RRP), public sector legal agreement, project administration memorandum (PAM), social and environmental monitoring reports are available or will be available after approval. A PID has been prepared for each subproject. Resettlement information booklets outlining the resettlement plans have been distributed to each affected household and disclosure meetings have been held. Copies of the booklets have been available at the respective PMO offices, and each affected village office. To enhance the environmental and health benefits of the Project, a public environment and hygiene awareness program in the communities in parallel with the existing environment and health programmes and in close coordination with the environmental protection bureaus and health bureaus in the project counties and cities will be carried out during implementation.

C. Gender and Development 1. Key Issues Results from the household survey and focus group discussion indicate that women are primarily responsible for collection of household water, wastewater disposal and management, household garbage disposal and management, and care for the sick and elderly. Time and efforts spent on these activities will be significantly reduced, enabling women to be engaged in income-generating activities and family or leisure time. Lack of water supply, wastewater disposal and collection, and solid waste disposal and collection contribute to gender inequities and add to the burden of household work. The poverty and social assessment indicates that women strongly support the Project across all of the subprojects. Women have perceived that the Project will improve their living environments, create employment opportunities, and reduce the incidence of water-, vector- and airborne diseases.

2. Key Actions Gender plan Other actions/measures No action/measure Project assurances prioritize women for employment and skills training. Of the total employment generated, a 15% target has been set for women during the project construction and operation phases. This has been agreed to by the IAs and will be monitored by the Project. Job training will be provided at the beginning of their employment. Core labor standards and an HIV/AIDS awareness training are included for all contractors in the loan assurances. The community-based environmental and hygiene awareness program will directly address women’s needs and health risks.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Significant/Limited/ Plan or Other Measures Issue No Impact Strategy to Address Issue Included in Design Involuntary Resettlement Significant A resettlement plan for each Full Plan subproject has been prepared in Short Plan accordance with the PRC laws and Resettlement regulations and ADB policy.a The Framework resettlement plans will be No Action distributed to the affected people and the public. Internal and external monitoring arrangements will be put into place.

60 Appendix 10

Significant/Limited/ Plan or Other Measures Issue No Impact Strategy to Address Issue Included in Design Indigenous Peoples No Impact Ethnic minorities represent a small Plan percentage of the total population Other Action (4.1%) scattered across the project Indigenous Peoples counties and cities. The social Framework analysis determined they are fully No Action integrated into the majority population, with similar customs and socioeconomic activities. Priority will be given to them for employment generated by the Project in the loan assurance. Labor Significant The Project will provide 6,620 full- Plan Employment opportunities time employment opportunities Other Action Labor retrenchment during construction and 1,380 full- No Action Core labor standards time jobs during the operation phase. Project assurances will ensure that all employment and core labor standards as provided in the applicable laws and regulations are complied with. Assurances address: core labor standards and prioritize local labor basic training and skill promotion. Affordability Limited The affordability of services by the Action poor has been assessed based on Other Action the proposed tariffs and household No Action income data. For average households and households in the lowest income class the share of income expended for the services will be below the 5% benchmark. Impacts on households in the lowest income class may be significant but will be mitigated through the existing tariff reduction and subsidy program provided by the respective local government. Other Risks and/or No Impact The project construction workers Plan Vulnerabilities will be engaged locally. HIV/AIDS Other Action HIV/AIDS training and sensitization will be No Action Human trafficking provided to the contractors, Others (conflict, political ensured in the loan assurances instability, etc), please and monitored in the social action specify plans. No other social risks and/or vulnerability are also anticipated as a result of the Project, except for the resettlement and land acquisition addressed in the resettlement plans.

IV. MONITORING AND EVALUATION Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No a A total of three full RPs and 18 short RPs with three due-diligence reports, and six statements of land acquisition and resettlement have been prepared.

Appendix 11 61

FINANCIAL ANALYSIS

A. Introduction

1. Financial analysis was carried out in accordance with the Financial Management and Analysis of Projects (2005) of the Asian Development Bank’s (ADB). Cost estimates were made in domestic currency units, with foreign exchange costs converted into yuan at the projected purchasing power parity exchange rate, taking into consideration the potential impacts of international and domestic inflation. Taxes and duties have been disclosed as part of the base costs. The projected financial statements for each subproject were prepared in current terms for the period 2008 to 2017 to cover the construction period and several years of commercial operation. Construction is assumed to be completed in about 4 years for each subproject, followed by a year of trial operations.

2. An assessment of the financial management capability of the executing agencies (EAs) and implementing agencies (IAs) of each subproject was made. The EAs have sound financial management systems and adequate experience of managing projects funded by foreign financial institutions. The IAs operate as state-owned enterprises. The accounting and financial management systems of IAs for financial reporting and accounting were adequate for loan implementation, although there is potential to improve internal control procedures. As some of the IAs may have no experience of externally funded projects, training on ADB procedures and requirements related to procurement, disbursement, financial reporting, monitoring, internal control, and anticorruption safeguards will need to be provided under the Project.

B. Financial Analysis

1. Financial Forecast

3. Based on previous financial statements, financial models were developed for all of the subprojects to assess their current financial situation and to forecast their performance during the construction period and up to several years of operations. The major assumptions used to calculate the financial internal rate of return (FIRR) were: (i) all calculations are made in 2008 prices; (ii) capital costs include all incremental capital expenditures related to the construction and purchase of equipment under the project, but exclude price contingencies and interest during construction; (iii) operating and maintaining costs include all annual incremental expenses incurred in operating the facilities, but exclude depreciation and debt repayment provisions; and (iv) operating revenues from tariffs used in the financial projections are also adjusted to 2008 prices. Overall, the FIRR for the water supply subprojects computed on an after-tax basis is 7.6% and 6.7% for wastewater subprojects.

2. Weighted Average Cost of Capital (WACC)

4. The WACC has been calculated in real terms for each subproject. Funding sources are the ADB loan, counterpart funds from the Government, and state bonds. In addition to these sources, domestic loans will also be used to finance selected water supply subprojects. For the ADB loan, the applicable 10-year fixed swap rate plus a provision for ADB’s spread of 0.20% was used. An estimated interest cost of 7.8% per annum was used for the domestic loan funds, while the opportunity cost of equity and state bonds was assumed to be 8%. The cost of debt was also adjusted to reflect the impact of income taxes of 25%.

62 Appendix 11

Table A11: Weighted Average Cost of Capital Financing Component Domestic Item ADB Loan Loan Government Equity Total

A. Amount in ($ million) 200.00 0.29 189.16 6.88 396.33 B. Weighting (%) 50.46 0.07 47.73 1.74 100.00 C. Nominal Cost (%) 4.87 7.80 8.00 8.00 D. Tax Rate (%) 25.00 25.00 0.00 0.00 E. Tax Adjusted Nominal Cost (%) 3.65 5.85 8.00 8.00 F. Inflation Rate (%) 0.80 5.00 5.00 5.00 G. Real Cost (%) 2.83 0.81 2.86 2.86 H. Weighted Component (%) 1.43 0.00 1.36 0.05 2.84 Source: Asian Development Bank.

5. The FIRR compares favorably with the average WACC of 2.84% for water supply and wastewater subprojects. The subprojects are considered financially viable and sustainable. Sensitivity tests were conducted under various adverse conditions that would cause the subprojects’ FIRR to fall below the WACC. The results of the sensitivity tests indicate that these conditions are unlikely to occur.

3. Projected Tariffs

6. The existing tariff will be reviewed and increased gradually to a level that will ensure full cost recovery. The water supply, wastewater, and solid waste management tariffs will be increased periodically during the implementation period through the Government’s consultative process, including public hearing and assessment of affordability for domestic users, especially for low-income households. In addition, the IAs will take measures to improve their operations to address system losses and nonrevenue water, and to improve the efficiency of collection. Implementation of these measures will be appropriately covenanted.

Appendix 12 63

ECONOMIC ANALYSIS

A. Policies, Targets, Rationale, and Tariffs

1. The Songhua River Basin (SRB) is seriously polluted and is acknowledged by the Ministry of Environmental Protection (MEP) to be one of the four most polluted river basins in the People’s Republic of China (PRC). Water pollution issues in the SRB, especially in relation to the protection of drinking water resources for the municipality of Harbin, have received increased national and international attention due to a widely publicized pollution incident in the SRB in November and December 2005. The Songhua River is contaminated with a number of known and suspected trace organic chemicals, metals, and conventional pollutants, and is classified by the Government as class IV1 (falling below class V during the 6-month low-flow winter season), and is considered unsuitable for municipal domestic water use.

2. In 2006, with the approval of the State Council, the SRB Water Pollution Prevention and Control Master Plan (SRBPCMP) was released by the MEP. A total of 40 wastewater treatment plants (WWTPs) will be constructed in Heilongjiang province and 38 in Jilin province during the 11th Five Year Plan (FYP) period as part of the SRBPCMP. Recognizing that adequate environmental protection and pollution controls are essential for sustainable economic growth, the Heilongjiang and Jilin provincial governments and project counties and cities have made environmental protection one of the main priorities in their development strategies. In the 11th FYP, both provinces plan to build more WWTPs. As set forth in the 11th FYP for environmental protection of Heilongjiang province, the urban wastewater treatment capacity will be expanded by 1.80 million cubic meters per day (m3/day) requiring a total investment of CNY5.453 billion ($790.3 million). According to the Jilin provincial 11th FYP for environmental protection, the urban wastewater treatment capacity will be expanded by 1.845 million m3/day; 1,631 kilometers (km) of new sewage network will be built; and 491,000 m3/day of effluent will be re-utilized, requiring a total investment of CNY5.965 billion ($864.5 million).

3. In theory, market mechanisms such as permits and taxes can be used to control emissions efficiently. However, in the water and solid waste sectors, neither a tradable permit system nor a pollution tax attain the least-cost solution in the way that theory suggests, because of regulated firms’ strategic behavior, regulatory capture, and asymmetric information (between the regulator and the firms). Limited private sector investment is expected since the cost-based pricing rule will be used in utility sectors, given the pressure on the Government from inflation and the need to ensure distributional justice. The investment by this project will not crowd out profit-driven private sector investments.

4. As for tariff reform, in addition to the goals of safe and affordable water for all and maximum net social benefits, there are several key criteria, such as financial sustainability, the user pays principle, simplicity, and transparency. Typically, water supply, wastewater and solid waste sectors are only covered from their operation and maintenance (O&M) costs and a fraction of capital costs. Historical tariffs were often established by price bureaus in a political process that has resulted in insufficient revenues and a need for subsidies from the municipality. There are at least four reasons for a periodic review and gradual increase in tariffs: (i) mandatory public hearings, (ii) ensuring a good tariff collection rate, (iii) higher tariffs for residential users to eliminate the industry to household cross-subsidy eventually, and (iv) a reasonable level of profitability for the utility companies in order to encourage private

1 The PRC water quality standards have five classes of quality covering about 40 pollution parameters. Class I is pristine, while class V is suitable only for industrial use.

64 Appendix 12 participation. The concern with distributional justice should not be a problem, since even under the most stringent circumstances, the average household would pay 1.5% to 2.9% of income for services, while the poor household would pay only 2.2% to 3.6%.

B. Demand Forecast and Least Cost Analysis

5. A demand forecast for each subproject was carried out by the Executing Agency (EA) and the project preparatory technical assistance (PPTA) consultants. This concluded that the risk associated with the demand forecast is minimal because the project’s supply will be lower than the total demands for water supplies and wastewater treatment services in the six cities and five counties2 in Heilongjiang province.

6. Two methods, lowest average incremental economic cost (AIEC) and net present value economic cost (NPVEC), are applied in the least-cost analysis for Heilongjiang province. All costs and outputs are derived from a with-project and without-project comparison, and discounted at the economic discount rate of 12%. The NPVEC equalizes net present value including incremental capital investment costs and O&M costs, and the AIEC is the net present value of incremental capital investment costs and O&M costs divided by the present value of incremental output. For water sources comparison, the ground water source is found to be more cost-effective than the surface water option. For the wastewater treatment process for Harbin City Xinyigou District WWTP, it is concluded that the A2O process is the best process. However, for the Qiqihar City WWTP, the CASS process is found to be more cost-effective than the A2O process.

7. Least-cost analyses of the Jilin component confirm the proposed technologies and sites are the least-cost options. For example, in several of the WWTP subprojects, Biolak and A2O technologies were compared. Using the equalizing discount rate approach, it is found that the Biolak option always has a lower discounted cost stream between 4% and 15% discount rate. In project site selection, all subprojects carefully selected the sites with lowest land acquisition cost, treatment cost, and negative spillovers for local residents.

C. General Parameters

8. The economic analysis is on a 25-year basis inclusive of the project construction period. Economic benefits and costs are denoted in terms of the domestic price numeraire and expressed in constant 2007 prices. International costs are converted to local currency costs at an exchange rate of CNY7.0 per $1, and are adjusted annually based on a purchasing power parity assumption. Project costs and benefits are estimated on a without- and with-project basis appropriately apportioned on the basis of nonincremental and incremental project effects in accordance with the ADB Guidelines for the Economic Analysis of Projects and Handbook for the Economic Analysis of Water Supply Projects. Tradable components are adjusted to economic prices using a shadow exchange rate factor of 1.013, and nontraded components are valued at domestic market prices.

D. Costs

9. Base costs plus physical contingencies of the Project and each of the subproject capital costs have been estimated and apportioned on the basis of tradable, nontradable, and skilled and unskilled labor costs. Similarly, O&M costs for each subproject and the overall Project are

2 The six cities are Fujin, Harbin, Jiamusi, Qiqihar, Qitaihe, and Shuangyashan. The five counties are Fangzheng, Nenjiang, Tonghe, Yanshou, and Tangyuan.

Appendix 12 65 estimated, apportioned on the basis of tradable and nontradable works, consumables, services, equipment and machinery, and skilled and unskilled labor valued in economic prices, i.e., shadow wage rate factors. Additional conversion factors are used when necessary and appropriate.3 Domestic transfer payments are excluded in the valuation of the cost estimates in economic prices. Physical contingencies are added to capital costs.

E. Project Benefits

10. The monitoring results and water pollution episodes strongly suggest serious water pollution damage in SRB. Previous research and field investigations by the consultants suggest that there are three broad categories of water pollution damage: damage to public health; damage to the surrounding ecosystems including agriculture and fisheries; and other damage, including to industrial production and residential property values. The project’s primary benefits for water-related subprojects include the following.

(i) Public health benefits. These may include reduced incidence of cancer, diarrhea, and respiratory ailments. (ii) Agricultural, aquacultural, and husbandry benefits. Use of sewage or polluted water for irrigation leads to lower production and lower product quality; use of polluted grain as food or animal fodder results in damage to health. (iii) Industry cost savings. There will be less need to treat polluted water, and product quality will improve. (iv) Industrial water shortages. Water pollution directly influences the quality of some industrial products, so a better water supply leads to economic benefits. (v) Industrial relocation cost savings. Assuming enforcement of industrial pollution abatement standards, fewer industrial facilities would have to relocate because of the cost of constructing on-site treatment facilities to achieve effluent discharge standards. (vi) Factory resource cost savings. A better centralized wastewater collection and treatment system will lead to savings in on-site treatment costs by industry. (vii) Land and property value increases. The provision of wastewater collection services to existing and future residential areas within the project area will greatly increase the value of these properties.

11. The categories and components of the economic costs are summarized in Table A12.1.

3 A standard conversion factor of 0.93 was used. Border prices were used for all imported items, 2.0 for skilled labor, and 0.67 for unskilled labor. Taxes and duties were excluded. Land is valued at the economic opportunity cost (the estimated value of the best alternative utilization).

66 Appendix 12

Table A12.1: Water Pollution Costs Types of Effect Damage Parameters Method used Damage to health Hospital Hepatitis, Calibrated dose-response, using comparison with admissions, dysentery, cancer clean area and literature assessments, treatment medicine, costs from local statistics Sick leaves Hepatitis, Loss of working days for patients and others from

dysentery, cancer local statistics, GDP/day Premature Cancer Loss of production due to early death, willingness to

deaths pay Drinking water Cost of additional treatment during high pollution

treatment periods; additional treatment by households Damage to crops Grains, Reduced amount Studies of the effect of using polluted irrigation vegetables water, value of crop Reduced quality Violating standards for selected contaminants, value of crop discarded Damage to fishery Reduced catch due Value of stock depletion to pollution Damage to Loss of animals Estimates from other areas, values of lost animals husbandry due to pollution Damage to Water shortage Estimated amount of water shortage; value of industry production per ton water Real estate Residence Housing price Estimated decrease of land and house values quality GDP = gross domestic product. Source: Asian Development Bank.

12. SRB is also facing great environmental challenges from the lack of solid waste treatment capacities. Solid waste disposal and management projects are primarily concerned with environmental health hazards created by the lack of waste collection services in less developed areas or the inappropriate handling of solid waste at landfill sites. Landfills in most municipalities and townships within the SRB urgently need to be expanded or new landfills need to be established at other locations. Most existing landfill facilities are already operating beyond the full capacity and are located in areas with large populations. The suggested alternatives in the FSRs will meet sanitary standards as the best alternative, based on environmental impact considerations. Both the WTP approach and direct environmental benefit valuation approach yield sufficiently high economic return to justify the subprojects. The benefits of the solid waste projects are listed in Table A12.2.

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Table A12.2: Economic Benefits of Solid Waste Management Impacts and Unit Values Aggregate Economic Value Category (CNY) (CNY/annum) Health effects from Restricted Activity Days 225, Mortality: 16,505,000 groundwater pollution YOLL acute effects 465,000, Morbidity: 9,134,800 YOLL chronic effects 252,000 ECU Agricultural effects from air Damage costs via: Agricultural damage: 301,500 pollution SO2 0.00042 CNY/ton of MSW NO 0.3587 CNY/ ton of MSW Visual and odor Number of affected households: 400,000 hh Disamenity value: ≅ 40 million disamenity Average Impact: CNY 100 hh/year Global warming External valuation for 1 tonne CO2: $3.6 Global warming damage: $1,959,200 (or CNY13,714,000)

Total Monetary Costs CNY79,655,300 per annum CO2 = carbon dioxide, hh = households, MSW = municipal solid waste, NO = nitrogen oxide, SO2 = sulfur dioxide, YOLL = years of life lost. Source: Asian Development Bank.

13. In the current study, to avoid possible double counting, land and property value appreciation is not included in the quantification because visual and odor disamenity reduction is added. Note further that the average disamenity value per household is assumed at CNY100 per year, which is very conservative (in studies on developed countries, it can be over €300). Nevertheless, the aggregate disamenity reduction value is still quite high because of the large number of affected households.

14. The demand forecast is in line with the empirical research on the relationship between solid waste growth and gross domestic product (GDP) growth,4 which has found that for every 1% increase in GDP, there is a 0.4056% increase in solid waste. This study showed that there is a unilateral casual relationship between GDP growth and solid waste growth in the PRC.

F. Economic Internal Rate of Return

15. The economic internal rate of return (EIRR) for the Heilongjiang component is calculated for each subproject and for the whole component. The EIRR calculation takes into account only the main benefits of different components but includes all project-related costs.5 For the subprojects, this approach yields EIRRs that range from 13.6% to 36.9%. For the whole component, the EIRR is 19.6%. For the Heilongjiang component, sensitivity analysis shows that the EIRR will decrease to (i) 17.5% if the whole project experiences a capital cost overrun of 10%; (ii) 15.0% if the benefits are reduced by 10%; (iii) 17.1% if the commissioning year of the Project is delayed by one year; (iv) 11.5% if (i), (ii), and (iii) all happen. Table A12.3 summarizes the EIRRs for the Heilongjiang subprojects.

4 Song, P. et al. 2007. Study on the Quantity Relations between the Growth of Solid Waste and the Economy of China, Environmental Science and Management, 32 (9): 72-75 5 The health and environmental benefits are the major benefits for wastewater treatment components. However, if the WTP is used, health benefits should be removed from the benefits, partly to avoid double counting, unless the WTP does not cover positive externality effects of the health benefits. To be conservative, the calculation analysis did not include health benefits because the WTP was used in all the components whenever it is applicable.

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Table A12.3: Summary of Economic Internal Rates of Return (Heilongjiang Subprojects) Subprojects EIRR (%) Fujin City Water Supply Expansion 28.0 Tangyuan County Water Supply 14.5 Tonghe County Water Supply Expansion 17.4 Yanshou County Water Supply Expansion 15.6 Fangzheng County WWTP + Sewerage Network 15.2 Fujin City WWTP 19.2 Harbin City Xinyigou District WWTP 14.1 Jiamusi City East District WWTP + Effluent Reuse 34.7 Nenjiang County WWTP + Sewerage Network 25.7 Qiqihar City WWTP (Phase II) 36.9 Qitaihe City Effluent Reuse 15.7 Shuangyashan City WWTP 14.2 Tangyuan County WWTP 13.6 Heilongjiang Component 19.6 EIRR = economic internal rate of return, WWTP = wastewater treatment plant. Source: Asian Development Bank.

16. The EIRR for the Jilin component is calculated for each subproject and for the whole component. The EIRR calculation takes into account only the main benefits of different components but includes all project-related costs. For the subprojects, this approach yields EIRRs ranging from 16.4% to 20.0%. For the whole component, the EIRR is 18.4%. Sensitivity analyses are performed for each subproject (details in Supplementary Appendix L). For the EIRR of the whole Project, sensitivity analysis shows the EIRR will decrease to (i) 16.4% if the Project experiences a cost overrun of 10%; (ii) 15.8% if the benefits are reduced by 10%; (iii) 15.5% if the Project experiences a commissioning delay of 1 year; and (iv) 12 1% if (i), (ii), and (iii) all happen. Table A12.4 summarizes the EIRRs for all Jilin subprojects.

17. The risk analysis was carried out to confirm the viability of the Project. The risk analysis was carried out using the Monte Carlo simulation technique under a 1,000 simulation basis. The inputs for the risk analysis are taken from the base case benefit analysis/cost. The correlation between risk variables is explicitly considered before the simulation to avoid generation of unrealistic project scenarios. The risk analysis for EIRR selected five variables, viz., capital cost, output, input prices, implementation delay, and exchange rate fluctuations. The expected EIRR, based on the weighted average of all simulated combinations, is 17.8% (with a standard deviation of 2.7%), about 2.9% lower than the base case value without consideration of project risks. The probability for the EIRR to be below the considered discount rate of 12% is 1.8%. The very low economic risk is intuitively expected because the project generates sound environmental benefits.

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Table A12.4: Summary of Economic Internal Rates of Return (Jilin Subprojects) Subprojects EIRR (%) WWTP Dehui City WWTP 19.1 Fusong County WWTP 19.8 Fuyu County WWTP 18.3 Gongzhuling City Fanjiatun Town WWTP 17.9 Gongzhuling City Sewage Network Upgrade 18.0 Jingyu County WWTP 18.2 Liuhe County WWTP 18.7 Tonghua County WWTP 18.8 Yushu City WWTP 19.5 SWM Da’an City SWM 16.4 Fusong County SWM 19.9 Huadian City SWM 18.0 Huinan County SWM 19.1 Jiaohe City SWM 19.3 Jingyu County SMW 17.2 Liuhe County SWM 19.2 Meihekou City SWM 19.0 Tongyu County SWM 19.3 Yushu City SWM 18.6 River Improvement Changbaishan Mountain Administrative Committee 20.0 Jilin Component 18.4 EIRR = economic internal rate of return, SWM = solid waste management, WWTP = wastewater treatment plant. Source: Asian Development Bank.

H. Distribution Analysis and Poverty Impact

18. The distribution analysis is based on the proportion of poor households in each county. The distribution analysis for the Jilin component is illustrated in Table A12.5. The differences between the net economic benefits (NEB) and the net financial benefits (NFB) give rise to losses and gains among the project participants. Considering the overall result of an NFB of negative CNY275.1 million and an NEB of CNY4120.6 million for the Project, the NEB exceeds the NFB by CNY3845.5 million. At a discount rate of 12%, the economy will gain CNY1504.9 million, mainly from operating costs. The share of the NEB of the Project accruing to the poor is 14.18%. Since the ratio is higher than the poverty ratio (estimated at 7.4% in the project area), the analysis concludes that the Project is pro-poor. The 14.18% share of NEB does not include indirect the benefits of the Project.

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Table A12.5: Distribution of Project Benefits and Poverty Impact (Jilin Component) Accounts Beneficiaries Financial Economic Difference Government Item Accounts Accounts Consumers Economy Labor Total Benefits 4,539.5 6,853.0 2,313.5 2,313.5 Costs Capital Costs 1,409.1 1,406.7 (2.4) 2.4 Operating 2,412.3 1,195.5 (1,216.8) 1,216.8 Costs Labor 157.3 130.3 (27.1) 27.1 Taxes 285.7 0.0 (285.7) 285.7 Total Costs 4,264.4 2,732.4 (1,532.0) Net Benefits 275.1 4,120.6 3,845.5 2,313.5 1,504.9 27.1 3,845.5 Poverty Impact Beneficiaries in Financial and Economic Accounts 2,313.5 1,504.9 27.1 3,845.5 Net Financial Benefits 275.1 275.1 Total 2,315.5 1,780.0 27.1 4,120.6 Proportion of Poor 12.0% 17.0% 15.0% 10.0% Benefits to Poor 277.6 302.6 4.1 584.3 Poverty Impact Ratio 14.18% Source: Asian Development Bank.

19. The distribution analysis for Heilongjiang component of the Project is provided in Table A12.6. The differences between the NEB and the NFB give rise to losses and gains among the project participants. Considering the overall result of an NFB of negative CNY152.6 million and an NEB of CNY540 million for the Project, the NEB exceeds the NFB by CNY692.6 million. The share of the NEB of the Project accruing to the poor is 13.37%.

Table A12.6: Distribution of Project Benefits and Poverty Impact (Heilongjiang Component) Accounts Beneficiaries Financial Economic Difference Government Item Accounts Accounts Consumers Economy Labor Total Benefits 1,640.0 2,134.0 494.0 494.0 Costs Capital Costs 887.0 734.0 (153.0) 153.0 Operating 710.0 750.0 (40.0) (40.0) Costs Labor 115.0 110.0 (5.0) 5.0 Taxes 80.6 0.0 (80.6) 80.6 Total Costs 1,792.6 1,594.0 (198.6) Net Benefits (152.6) 540.0 692.6 494.0 193.6 5.0 692.6 Poverty Impact Beneficiaries in Financial and Economic Accounts 494.0 193.6 5.0 692.6 Net Financial Benefits (152.6) 152.6 Total 494.0 41.0 5.0 540.0 Proportion of Poor 13.0% 17.0% 20.0% 0.0% Benefits to Poor 64.2 6.9 1.0 72.2 Poverty Impact Ratio 13.37% Source: Asian Development Bank.